Appendix — Piper Jaffray, Inc. v. Halligan
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APPENDIX A — OPINION OF THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
DATED AND DECIDED JULY 9, 1998
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 1997
Argued: January 9, 1998 Decided: July 9, 1998
Docket Nos. 97-7801, -7839
IRENE HALLIGAN, as Executrix
of the Estate of Theodore H. Halligan,
Petitioner-Appellant,
—against—
PIPER JAFFRAY, INC., and MARVIN GEISNESS,
Respondents-Appellees.
Before:
FEINBERG and KEARSE, Circuit Judges,
and PARKER™, District Judge.
Hon. Barrington D. Parker, Jr., United States District Judge for the South-
ern District of New York, sitting by designation
2a
Appendix A
Appeal from orders of the United States District Court for
the Southern District of New York, Kimba M. Wood, J., con-
firming an arbitration award in favor of respondents on peti-
tioner’s claim under the Age Discrimination in Employment
Act, 29 U.S.C. § 621 et seq., and other claims, which were
submitted to arbitration pursuant to a pre-dispute agreement
to arbitrate imposed as a condition of employment, and dis-
missing as barred by res judicata a federal complaint based
on the same underlying facts. Held, panel concludes that
because arbitrators’ award was in “manifest disregard” of the
law or the evidence or both, it 1s vacated.
Reversed and remanded.
KATHLEEN O'CONNELL, New York, NY (Murphy
& O'Connell, of Counsel), for Petitioner-
Appellant.
JILL L. ROSENBERG, New York, NY (Orrick,
Herrington & Sutcliffe LLP, Robert C.
Whitman, of Counsel), for Respondents-
Appellees.
Fredda L. Plesser, Vice President & Associate
General Counsel, Securities Industry Asso-
ciation, New York, NY, for Respondents-
Appellees as Amicus Curiae.
C. Gregory Stewart, General Counsel, J.
Ray Terry, Jr. Deputy General Counsel,
Gwendolyn Young Reams, Associate General
Counsel, Lorraine C. Davis, Assistant Gen-
eral Counsel, Robert J. Gregory, Attorney,
3a
Appendix A
Equal Employment Opportunity Commission,
Washington, DC, as Amicus Curiae.
FEINBERG, Circuit Judge:
Irene Halligan (Mrs. Halligan), as executrix for the Estate
of Theodore Halligan (Halligan), appeals from orders dated
April 14, June 10 and June 16, 1997 of the United States Dis-
trict Court for the Southern District of New York, Kimba M.
Wood, J. The orders of April 14 and June 10 respectively
refused to vacate and then confirmed an arbitration award in
favor of defendants Piper Jaffray, Inc. (Piper) and Marvin
Geisness, Halligan’s sales partner, on Halligan’s claim,
among others, that defendants had terminated his employ-
ment in violation of the Age Discrimination in Employment
Act (ADEA), 29 U.S.C. § 621 et seq. The order of June 16,
1997, dismissed as barred by res judicata Mrs. Halligan’s
federal complaint based on the same underlying facts as the
ADEA claim in arbitration.
Mrs. Halligan argues, among other things, that the award
reflected “manifest disregard” of the law. We agree, and
accordingly reverse the orders of the district court.
I. Background
Halligan was hired by Piper in 1973 as a salesman of
equity investments to financial institutions. As a condition of
employment, Halligan was required by the industry self-reg-
ulatory organization, the National Association of Securities
Dealers (NASD), to sign a standard form (U-4) containing an
agreement to arbitrate any future disputes.' In 1988, Tad
' Halligan was required to agree ‘to arbitrate any dispute. . . that may arise
between me and my firm. . . required to be arbitrated under the rules, con-
4a
Appendix A
Piper succeeded his father as CEO of Piper. Mrs. Halligan
contends that thereafter Halligan was forced from his job in
December 1992 by Tad Piper and Halligan’s supervisor,
Bruce Huber, because of his age and despite his continuing
high performance.
In October 1993, Halligan submitted his ADEA claim,
along with other claims, to arbitration before a panel of
NASD arbitrators. Before he could complete his own re-
direct testimony, however, his health deteriorated and in early
1995 the arbitrators were advised that Halligan was unable to
testify further. By stipulation, the arbitrators struck his re-
direct testimony from the record and continued the pro-
ceeding. Halligan’s direct testimony had been subject to
cross-examiination and was not stricken. After his death, Mrs.
Halligan continued the arbitration.
During the arbitration hearings, Halligan presented the
arbitrators with very strong evidence of age-based discrim-
ination. Piper for its part has conceded throughout that Hal-
ligan was “basically qualified.” Piper principally contended
that Halligan had chosen to retire; it also argued that per-
formance and health issues justified its conduct.
Before leaving Piper in December 1992, Halligan was
making nearly $500,000 per year. He ranked fifth out of 25
institutional salesmen. He was ranked first from 1987
through 1991, and had consistently been among Piper’s top
salesmen. He testified as to repeated discriminatory state-
ments by Tad Piper, Huber, and Halligan’s younger partner
Geisness. For example, Halligan testified that at a meeting on
stitutions, or by-laws of [the NASD.]" When Halligan signed his U-4, section
1 of the NASD's Code of Arbitration Procedure allowed for the submission of
“any dispute. . . arising out of or in connection with the business of any mem-
ber. . . between or among members and public customers, or others. . . .”
Section 8 required submission of “[a)]ny dispute. . . eligible for submission
. . . between. . . members and/or associated persons . . . arising in con-
nection with the business of such member(s). . . .”
Sa
Appendix A
August 27, 1992, Tad Piper told him “you're too old. Our
clients are young and they want young salesmen,” and Huber
told him “we want you out of here quickly.” Tad Piper and
Huber denied making such remarks. Halligan also testified
that during a telephone conversation on September 10, 1992,
Huber told him that “we want you out of Piper Jaffray by the
end of the year,” and that “if you don’t leave, we will fire
you.” Halligan testified that he then asked if he could Stay for
the remainder of the year, and that Huber agreed. Huber tes-
tified that during the conversation, Halligan asked him what
he should do. He testified that he advised Halligan to resign,
and that Halligan agreed “then that’s what it will be.” Huber
admitted that Halligan had never requested his advice before.
There were no witnesses to this conversation.
Halligan’s evidence also included his notes of this and
other conversations, a witness who testified that he had seen
Halligan recording notes, and several witnesses who heard
Halligan say he was being “fired.” In addition, Halligan
called many witnesses who testified that Piper personnel had
expressed theif intention to oust Halligan on account of his
age. John Dockendorff, a former client and later competitor,
testified that in 1989 (the year after Tad Piper became CEO)
Huber attempted to recruit him (in Dockendorff’s words) to
“learn as much as I could about {Halligan’s} accounts,”
because Halligan “would get put out to pasture because he
was getting old.” All Piper personnel denied having made
such statements, although their testimony was occasionally
inconsistent or ambiguous. Halligan presented testimonials
from current and former clients and colleagues who testified
that Halligan was among the best in his field. Halligan
refused to provide Piper with a letter of resignation. He also
refused an offer of a retirement party and refused to write a
letter to his clients saying he was retiring. On November 23,
1992, Halligan’s lawyer sent a letter threatening suit if Hal-
6a
Appendix A
ligan was terminated. In addition, Halligan testified that he
approached Huber in November and asked him if he could
keep his job. Huber replied that plans had already been made
to close the New York office. Apparently, those plans con-
sisted simply of termination notices to two support staff. Hal-
ligan’s accounts were thereafter assigned to two younger
men. Halligan testified that he unsuccessfully looked for a
new job after leaving Piper.
Piper principally argued that it gave Halligan the options
of retiring, agreeing to a new percentage split with Geisness
or being assigned a new group of accounts, and that Halli-
gan agreed to retire in the phone conversation on September
10, 1992. Piper also contended its conduct was justified by
concerns over Halligan’s performance and health. Halligan
had surgery for oral cancer twice (in 1990 and 1991), but
returned to work each time after approximately two weeks.
Halligan conceded that the surgeries had caused slight
speech impairment, but offered various witnesses who tes-
tified that Halligan was always able to perform his job.
Piper discounted Halligan’s objective evidence of perfor-
mance, arguing that Halligan’s accounts had more inherent
potential and that the rankings failed to reflect the contri-
butions that other employees had made to Halligan’s suc-
cess. In addition, Huber testified that he thought Halligan
needed to develop accounts more effectively (although
Huber was unable to identify specific accounts) and use the
firm’s research and other resources more efficiently. Piper
submitted various memoranda related to these concerns, and
offered testimony by various witnesses who, with the excep-
tion of one employee who had recently retired, were all
Piper officers or major shareholders. Piper discounted the
testimonials in favor of Halligan, arguing that it was not his
clients and former colleagues whose expectations Halligan
had to satisfy.
7a
Appendix A
Huber was the only witness testifying that in the Septem-
ber 10th telephone conversation Halligan accepted the
“option” of retirement, and Huber was contradicted as to key
elements of his testimony by other Piper witnesses. For
example, Huber testified that Geisness was not informed of
the August 27 meeting before it took place, but both Tad
Piper and Geisness testified to the contrary. Geisness testified
that when he discussed this meeting with Huber, he asked
Huber to keep the New York office open.
In March 1996, after extensive hearings, the arbitrators
rendered a written award setting forth the claims and
defenses of each party, and denying any relief to the Halli-
gans. The award did not contain any explanation or rationale
for the result.
In June 1996, Mrs. Halligan petitioned the district court to
vacate the award under § 10(a) of the Federal Arbitration Act
(FAA), 9 U.S.C. § 10(a). She argued, among other things, that
given the very strong evidence of discrimination and the
clear description of the applicable law presented to the arbi-
trators, the award reflected manifest disregard of the law.
Piper agreed that the law governing the claim was gener-
ally not disputed by the parties, but argued in response that
it was not the function of the court to review the merits of the
decision and that the arbitrators’ award was supported by the
evidence Piper presented. Piper cross-petitioned the district
court to confirm the award.
The district judge refused to vacate the award. She stated
in the order of April 14, 1997 that
[hjere, the determination of what constitutes “direct evi-
dence’ [of discrimination] . . . is a difficult one to
make. In addition, the record. . . does not indicate the
Panel’s awareness, prior to its determinations, of the
standards for burdens of proof. . . . [T]he Panel was
8a
Appendix A
faced with the task of evaluating conflicting witness tes-
timony, and where it did not issue a written opinion, |
cannot conclude that the panel did in fact disregard the
parties’ burdens of proof. . . . [C]rediting one witness
over another does not constitute manifest disregard of
the law [and] this Court’s role is not to second-guess the
fact-finding donc by the Panel. Because there is factual
as well as legal support for the Panel’s ultimate con-
clusion, I determine that the Panel did not manifestly
disregardthe law. . . . (internal citations and footnote
omitted).
The judge granted Piper’s cross-petition to confirm the award
in her order of June 10, 1997.
In addition to petitioning to vacate the arbitration award,
in October 1996 Mrs. Halligan had filed a complaint in the
district court based upon the same underlying facts and rais-
ing the ADEA claim. Piper moved to dismiss this complaint
on grounds of res judicata, and the district court granted the
motion in its order dated June 16, 1997.
I]. Analysis
Mrs. Halligan argues in this court, among other things, that
the arbitrators’ award reflected manifest disregard of the law.
Piper argues in response, among other things, that it is not
the function of this court to reassess the evidence or make
judgments about witness credibility and that the district court
was able to adequately review the award—even in the
absence of a written explanation—by inferring from the
record grounds that support the arbitrators’ award. We have
also received amicus briefs from the Equal Employment
Opportunity Commission (EEOC) and the Securities Indus-
try Association (SIA).
9a
Appendix A
A. Arbitrability of ADEA Claims
This appeal arises in a context that has become increas-
ingly important in the federal courts. The use of arbitration
as a device to resolve disputes has received Strong judicial
Support in the last few decades, both in labor management
disputes and also in disputes involving ordinary commercial
contracts. See e.g., AT&T Technologies, Inc. v. Communi-
cations Workers of America, 475 U.S. 643, 650 (1986) (labor
dispute); Moses H. Cone Memorial Hosp. v. Mercury Constr.
Co., 460 U.S. 1, 24-25 (1983) (commercia] dispute). It has
been made clear by the Supreme Court, this court and other
courts that the ancient judicial hostility to arbitration is a
thing of the past. See e.g, Moses H. Cone Memorial Hosp.,
460 U.S. at 24; Leadertex vy. Morganton Dyeing & Finishing
Corp., 67 F.3d 20, 24-25 (2d Cir. 1995): Finegold, Alexander
+ Assocs., Inc. v. Setty & Assocs., Ltd.. 81 F.3d 206, 207-08
(D.C. Cir. 1996); José A. Cabranes, Arbitration and U.S.
Courts—Balancing Their Strengths, A.D.R. Currents, Fall
1997, at 1. However, one aspect of the increased use of arbi-
tration has recently engendered greater scrutiny and con-
troversy—the use of mandatory pre-dispute arbitration
agreements to resolve statutory claims of employment dis-
crimination. Such agreements require an individual, as a con-
dition of employment, to agree in advance to arbitration of
future claims alleging violation of a statute prohibiting dis-
crimination in employment. The arbitration award here arose
out of such an agreement.?
2 Piper contends that Halligan voluntarily submitted his claim to arbitration.
Halligan had, however, been required to agree to an extremely broad arbitration
clause, see footnote 1, which established a presumption of arbitrability that could
only be overcome if “it may be said with Positive assurance that the arbitration
Clause is not susceptible of an interpretation that covers the asserted dispute.”
Associated Brick Mason Contractors of Greater New York, Inc. v. Harrington,
820 F.2d 31, 35 (2d Cir. 1987) (quoting AT&T Technologies, Inc. v. Commu-
nications Workers of America, 475 U.S. 643. 650 (1986)). In light of our current
caselaw, Halligan was correct in considering himself bound to arbitrate.
10a
Appendix A
In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 2(
(1991), the Supreme Court found for the first time that ar
employee could be held to his pre-dispute agreement to arbi.
trate his claim under the ADEA, the same statute upon whict
the Halligans rely. The Court relied on a line of cases, com.
mencing with Mitsubishi Motors Corp. v. Soler Chrysler-Ply-
mouth, Inc., 473 U.S. 614 (1985), that held enforceable
pre-dispute arbitration agreements as applied to claims unde
various federal statutes, including the securities acts and
RICO. In Mitsubishi, the Court had enforced an agreement
between two corporations to arbitrate claims under the fed-
era] antitrust laws, on the premise that “[b]y agreeing to arbi-
trate a statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their reso-
lution in an arbitral, rather than a judicial, forum.” Id., 473
U.S. at 628. In Gilmer, which quoted this language, the Court
held that an employee, who had been required to sign a form
containing an agreement to arbitrate as a condition of
employment, had not shown that Congress intended to pre-
clude the waiver of a judicial forum for ADEA claims. 500
U.S. at 26. Again quoting from Mitsubishi, the Court stated
that “[s]o long as the prospective litigant effectively may vin-
dicate [his or her] statutory cause of action in the arbitral
forum, the statute will continue to serve both its remedial and
deterrent function.” Id. at 28.
The Court also noted in Gilmer the contention “that judi-
cial review of arbitration decisions is too limited” to ade-
quately protect statutory rights. Id. at 32 n.4. Quoting from
Shearson/American Express Inc. v. McMahon, 482 U.S. 220,
232 (1987), the Court rejected that argument, stating that
“although judicial scrutiny of arbitration awards necessarily
is limited, such review is sufficient to ensure that arbitrators
comply with the requirements of the statute.” Gilmer, 500
U.S. at 32 n.4. The employee in Gilmer also generally chal-
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Appendix A
lenged the procedures usually employed in arbitration. The
Court stated that these “claimed procedural inadequacies” are
“best left for resolution in specific cases.” Id. at 33.
B. Standard of Review of Award
The parties agree that review of arbitration awards is gen-
erally governed by the FAA. The relevant statutory language
is reproduced in the margin.? In addition, relying on an obser-
vation by the Supreme Court in Wilko v. Swan, 346 U.S. 427.
436-37 (1953), overruled on other grounds in Rodriguez de
Quijas v. Shearson/American Express, Inc., 490 U.S. 477
(1989), this court has also recognized that an arbitration
award may be vacated if it is in “manifest disregard of the
Jaw.” See e.g., Carte Blanche (Singapore) Pte., Ltd. v. Carte
Blanche Int'l, Ltd., 888 F.2d 260, 265 (2d Cir. 1989); Merril]
Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930,
933 (2d Cir. 1986). We have also pointed out, however, that
the reach of the doctrine is “severely limited.” Government
of India v. Cargill, Inc., 867 F.2d 130, 133 (2d Cir. 1989).
Indeed, we have cautioned that manifest disregard “clearly
means more than error or misunderstanding with respect to
the law.” Bobker, 808 F.2d at 933. We have further noted that
to modify or vacate an award on this ground, a court must
find both that (1) the arbitrators knew of a governing legal
principle yet refused to apply it or ignored it altogether, and
3
The FAA provides that an award may be vacated where
(1). . . the award was procured by corruption, fraud or undue means[,]
(2). . . there was evident partiality or corruption in the arbitrators. . . [,]
(3). . . the arbitrators were guilty of misconduct in refusing to postpone
the hearing, upon sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy; or of any other misbehavior by
which the rights of any party have been prejudiced [; or]
(4). . . the arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the. . . matter submitted
was not made.
9 U.S.C. § 10(a).
12a
Appendix A
(2) the law ignored by the arbitrators was well defined,
explicit, and clearly applicable to the case. DiRussa v. Dean
Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir. 1997), cert.
denied, 118 S.Ct. 1695 (1998).
This case also arises in the context of other developments.
In the aftermath of Gilmer, as we have already noted, manda-
tory binding arbitration of employment discrimination dis-
putes as a condition of employment has caused increased
controversy. Attention has focused on, among other things,
whether additional procedural requirements are necessary to
ensure that employees will be able, in the words of Gilmer,
to “effectively . . . vindicate” their statutory rights in arbi-
tration. 500 U.S. at 28. See e.g., Commission on the Future
of Worker-Management Relations, Report and Recommen-
dations (1994) (Dunlop Report); EEOC Policy Statement on
Mandatory Binding Arbitration of Employment Discrimina-
tion Disputes as a Condition of Employment, No. 915.002
(July 10, 1997); Samuel Estreicher, Predispute Agreements
to Arbitrate Statutory Employment Claims, 72 N.Y.U. L. Rev.
1344, 1352-59 (1997). The major independent arbitration
agencies have formulated due process standards for the adju-
dication of these disputes. See e.g., National Academy of
Arbitrators, Guidelines on Arbitration of Statutory Claims
Under Employer-Promulgated Systems (Statement adopted
May 21, 1997); American Arbitration Association, National
Rules for the Resolution of Employment Disputes (1996, as
amended 1997); JAMS/ENDISPUTE, Six Principles of Neu-
trality and Fairness for Employment Dispute Resolution
Practice (1995).
Industry self-regulatory organizations (SRO’s) like the
NASD have been singled out for criticism because, among
’ See generally, Michael P. O’Mullan, Note, Seeking Consistency in Judicial
Review of Securities Arbitration: An Analysis of the Manifest Disregard of the
Law Standard, 64 Fordham L. Rev. 1121 (1995).
l3a
Appendix A
other reasons, the role they play in determining the pool of
available arbitrators and Selecting the arbitrators who will
hear a particular discrimination claim against a member firm
of the SRO calls into question the impartiality of the arbi-
trators selected. Sec e.g., Rosenberg v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., Civ. No. 96-12267, 1998 WL 81907, at
*16-*21 (D. Mass. Jan. 26, 1998) (appeal pending) (dis-
cussing possibility of institutional bias due to industry influ-
ence Over arbitration before SRO's and, in particular, under
the rules of the New York Stock Exchange); George Nicolau,
Gilmer v. Interstate/Johnson Lane Corp.: Its Ramifications
and Implications for Employees, Employers and Practition-
ers, | U. Pa. J. Lab. & Emp. L. 175, 183 (forthcoming 1998).
Mrs. Halligan argues that the NASD has undue influence
here. Under the NASD’s Code of Arbitration Procedure, a
pool of arbitrators “from within and without the securities
industry” is selected by a National Arbitration Committee, a
body appointed annually by the Board of Governors “of such
size and composition, including representation from the pub-
lic at large, as [the Board) shall deem appropriate and in the
public interest.” NASD Code of Arbitration Procedure § 2.
The composition of particular panels is then determined by a
Director of Arbitration who is also appointed by the Board of
Governors, and the Director has discretion to allow the Exec-
utive Committee of the National Arbitration Committee to
appoint the panel for a case directly. ld. at §§ 3-4. Each Party
is allowed a single peremptory challenge as of right. Id. ai
§ 22.
In response to criticism, the NASD has recently filed a
proposed rule change with the Securities and Exchange Com-
mission under which its member Organizations would not be
required to condition employment on an employee's agree-
ment to arbitrate these disputes. Notice of Filing of Proposed
Change by the NASD Relating to the Arbitration of Employ-
l4a
Appendix A
ment Discrimination Claims, 62 F.R. 66164 (December 17,
1997). The filing promises further unspecified rule changes
to enhance the fairness of the procedures applied by the
NASD in this context. There have also been bills introduced
in Congress that would prevent pre-dispute waiver of a judi-
cial forum. See the Civil Rights Procedures Protection Act of
1997, S. 63, H.R. 983, 105th Cong. (1997).
In addition, the federal courts have shown growing concern
over the problem. For example, the D.C. Circuit has recently
emphasized the necessity of adequate review in enforcing a
mandatory, pre-dispute agreement to arbitrate Title VII dis-
crimination claims. Cole v. Burns Int’! Sec. Serv., 105 F.3d
1465 (D.C. Cir. 1997). Similarly, in Prudential Ins. Co. of
Am. v. Lai, 42 F.3d 1299 (9th Cir. 1994), the Ninth Circuit
held that waivers of a judicial forum for statutory employ-
ment discrimination claims must be “knowing and voluntary”
and refused to enforce an agreement to arbitrate that did not
meet that standard. See also Chisolm v. Kidder, Peabody
Asset Management, 966 F. Supp. 218, 225-26 (S.D.N.Y.
1997) (appeal pending) (thorough review of relevant author-
ities); Rosenberg, 1998 WL 81907 (holding employee could
not be compelled to arbitrate her claim given questions as to
the voluntary nature of her agreement to arbitrate and pro-
cedural deficiencies in the proposed arbitral forum). Given
our disposition of this appeal on the merits of the award
issued in this case, with one exception discussed below we
do not address Mrs. Halligan’s generalized challenge to arbi-
trations conducted under the aegis of the NASD.
C. Application of Standard of Review
We turn now to review of the district court’s decision in
this case. Mrs. Halligan argued in the district court and
repeats to us that the arbitration award reflected manifest dis-
regard of the law. Mrs. Halligan makes a strong case for that
I
15a
Appendix A
proposition. Quite simply, Halligan presented overwhelming
evidence that Piper’s conduct after Tad Piper became CEO
was motivated by age discrimination. Halligan testified to
repeated discriminatory statements, and offered contempo-
raneous notes supporting his version of events, which were
in turn backed by the testimony of a witness who saw him
making notes. Halligan also presented the testimony of
numerous other witnesses who testified that Piper personnel
admitted that the company wanted Halligan out. Halligan
presented powerful evidence of his performance, in the form
of quantitative sales rankings and relevant witness testimony.
Notwithstanding Piper’s testimony as to Halligan’s perfor-
mance and health, Piper conceded before the arbitrators—and
continues to do so—that Halligan’s continuing performance
Was not So unsatisfactory as to justify discharge. Indeed, its
principal argument has been that Halligan retired voluntarily.
Halligan also made a very strong showing that he did not
choose the “option” of quitting but was fired. The Strength of
Halligan’s showing of discriminatory motive is most proba-
tive of whether Piper took discriminatory action, i.e., fired
him. In addition, the circumstantial evidence Surrounding his
departure, e.g., his statements to various witnesses about his
being “fired,” his refusal to write to his clients announcing
his “resignation,” his retention of counsel, is consistent only
with a finding that Halligan was pushed out of his job.
Moreover, this is not a case like DiRussa where we refused
to find “manifest disregard” because DiRussa had not suffi-
ciently brought the governing law to the attention of the arbi-
trators. There is no such problem here. The record indicates
that counsel for both parties generally agreed on the appli-
cable law (and still do on appeal), and explained it to the
arbitrators. It is true that the district court stated that the
record “does not indicate the Panel’s awareness, prior to its
determinations, of the standards for burdens of proof.” If this
l6a
Appendix A
observation meant that counsel did not explain the law suf-
ficiently to the arbitrators, it is not correct. Perhaps the dis-
trict court meant that the arbitrators did not state that they
were ignoring the relevant standards for burdens of proof.
That is true, but we doubt whether even under a Strict con-
struction of the meaning of manifest disregard, it is necessary
for arbitrators to state that they are deliberately ignoring the
law. See DeGaetano v. Smith Barney, Inc., 983 F.Supp. 459,
463 (S.D.N.Y. 1997).
In view of the strong evidence that Halligan was fired
because of his age and the agreement of the parties that the
arbitrators were correctly advised of the applicable legal
principles, we are inclined to hold that they ignored the law
or the evidence or both. Moreover, the arbitrators did not
explain their award.‘ It is true that we have stated repeatedly
that arbitrators have no obligation to do so. E.g., Sobel v.
Hertz, Warner & Co., 469 F.2d 1211, 1214 (2d Cir. 1972);
Koch Oil, S.A. v. Transocean Gulf Oil Corp., 751 F.2d 551,
554 (2d Cir. 1985); Andros Compania Maritima, S.A. v. Marc
Rich & Co., A.G., 579 F.2d 691, 704 (2d Cir. 1978). But in
Gilmer, when the Supreme Court ruled that an employee
could be forced to assert an ADEA claim in an arbitral
forum, the Court did so on the assumptions that the claimant
would not forgo the substantive rights afforded by the statute,
that the arbitration agreement simply changed the forum for
enforcement of those rights and that a claimant could effec-
tively vindicate his or her statutory rights in the arbitration.
500 U.S. at 26, 28. This case puts those assumptions to the
test. The Court also stated in Gilmer that “claimed procedural
inadequacies” in arbitration “are best left for resolution in
specific cases,” 500 U.S. at 33. At least in the circumstances
here, we believe that when a reviewing court is inclined to
5 A leading expert in the field has asserted that NASD arbitrators are
expressly advised that they are not required to follow the law and need not give
reasons for their determination. Nicolau, supra, p. 17, at 183.
a
17a
Appendix A
hold that an arbitration panel manifestly disregarded the law,
the failure of the arbitrators to explain the award can be taken
into account. Having done so, we are left with the firm belief
that the arbitrators here manifestly disregarded the law or the
evidence or both.
Piper argues that the arbitration panel resolved the case in
accordance with substantive ADEA law: for example, it cred-
ited Piper’s witnesses rather than Halligan’s. Had the arbi-
trators offered that explanation of the award, on this record
it would have been extremely hard to accept—but they did
not do even that. There is some authority permitting discre-
tionary remand of a case to the arbitrators for a written expla-
nation of their award. Siegel v. Titan Indus. Corp., 779 F.2d
- 891, 894 (2d Cir. 1985) (per curiam). But in view of the
entire record here, we see no persuasive reason for doing so.
We want to make clear that we are not holding that arbi-
trators should write opinions in every case or even in most
cases. We merely observe that where a reviewing court is
inclined to find that arbitrators manifestly disregarded the
law or the evidence and that an explanation, if given, would
have strained credulity, the absence of explanation may rein-
force the reviewing court’s confidence that the arbitrators
engaged in manifest disregard.
For the reasons stated above, we reverse the district court’s
orders of April 14, 1997 and June 10, 1997 respectively
refusing to vacate and then confirming the award. We also
reverse the order of June 16, 1997 dismissing the complaint
filed in the district court by Mrs. Halligan because there is no
enforceable award to bar the suit on res judicata principles.
We remand to the district court for further proceedings con-
sistent with this opinion.
18a
APPENDIX B — OPINION AND ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK DATED JUNE 16, 1997
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
96 Civ. 7468 (KMW)
IRENE HALLIGAN as Executrix of the Estate of THEODORE
H. HALLIGAN,
Plaintiff,
-against-
PIPER JAFFRAY, INC. & MARVIN GEISNESS,
Defendants.
OPINION & ORDER
WOOD, U:S.D.J.
Plaintiff Irene Halligan (“Plaintiff”) initiated this action
under the Age Discrimination in Employment Act (the
“ADEA”), alleging that defendants Piper Jaffray, Inc. (“Piper
Jaffray”) and Marvin Geisness (collectively, “Defendants”)
discriminated against her late husband, Theodore Halligan (“Mr.
Halligan”), a former employee of Piper Jaffray. Defendants
have moved to dismiss the complaint in this action, pursuant to
Fed. R. Civ. P. 12(b)(1) and 12(b)(6). This Court has already
entered judgment confirming an award in arbitration based upon
the same claim that is the subject of the instant lawsuit;
19a
Appendix B
accordingly, under the doctrine of res judicata, I now dismiss
this complaint, pursuant to Fed. R. Civ. P. 12(b)(6), for failure
to state a claim upon which relief can be granted.
The shared factual background of this action and the related
action before this Court, Halligan v. Piper Jaffray, Inc. and
Marvin Geisness, No. 96 Civ. 4472, is set out more fully in the
Court’s Opinion and Order in the latter case dated April 14,
1997, with which I assume familiarity. In brief, Mr. Halligan
alleged that his former employer, Piper Jaffray, terminated him
in violation of the ADEA and other common law rights. In
October of 1993, Mr. Halligan initiated an arbitration
proceeding on those claims against Defendants. Mr. Halligan
died in October of 1995, before the arbitration had been
completed. Plaintiff authorized Mr. Halligan’s counsel, now
Plaintiff's counsel, to continue with the arbitration. In March
of 1995, the arbitration panel issued an award that denied all of
Mr. Halligan’s claims. Subsequently, in the action to which
this case is related, No. 96 Civ. 4472, Plaintiff here (Petitioner
in that action) petitioned to vacate the arbitration award;
Defendants (Respondents in the related action) cross-petitioned
to confirm the award. In an Opinion and Order dated June 10,
1997, this Court confirmed that award, entered judgment for
Defendants, and closed the related case.
It is settled in this circuit that the findings of arbitration
boards may serve as the basis for res judicata in an action in
federal court. See Khandar v. Elfenbein, 943 F.2d 244, 244 (2d
Cir. 1991) Res judicata bars the re-litigation of the same issues
between the same parties after those issues have been resolved
by a court of competent jurisdiction. Stone vy, Williams, 970
F.2d 1043, 1054 (2d Cir. 1992). Where, as here, an arbitration
award has been confirmed by a court of competent jurisdiction,
20a
Appendix B
the final entry of judgment by that court gives the award res
judicata effect. Plaintiff had a fair opportunity to argue fully
Mr. Halligan’s ADEA and other claims before the arbitration
panel, and res judicata now precludes Plaintiff from bringing
the same claim, or any other claim that could have been decided
by the arbitration panel, before this Court.
Because Plaintiff s claims are barred by res judicata, I grant
defendants’ motion to dismiss the complaint with prejudice
pursuant to Fed. R. Civ. P. 12(b)(6). I therefore order the Clerk
of Court to close this case. Any pending motions are hereby
deemed moot.
SO ORDERED:
New York, New York
June 16, 1997
s/ Kimba M. Wood
Kimba M. Wood
United States District Judge
Copies of this order have been mailed to counsel for the
respective parties.
2la
APPENDIX C — OPINION AND ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK DATED JUNE 10, 1997
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
96 Civ. 4472 (KMW)
IRENE HALLIGAN as Executrix of the Estate of THEODORE
H. HALLIGAN,
Petitioners,
-against-
PIPER JAFFRAY, INC. & MARVIN GEISNESS,
Respondents.
OPINION & ORDER
WOOD, U.S.D.J.
Petitioner Irene Halligan (“Petitioner”) filed a petition to
vacate an arbitration award (the “Award”) made after an
arbitration proceeding brought by her husband, Theodore
Halligan (“Mr. Halligan”), against Piper Jaffray, Inc. and
Marvin Geisness (“Respondents”), alleging violation of the Age
Discrimination in Employment Act and other common law
rights. The Award rendered on March 19, 1995, denied all of
Mr. Halligan’s claims. In an opinion and order dated April 14,
1997, I denied the petition to vacate. Respondents have
cross-petitioned to confirm the Award. For the following
reasons, I grant Respondents’ cross-petition.
22a
Appendix C
I. Analysis
The factual background of this action is fully set forth in
my opinion and order of April 14, 1996, with which I assume
familiarity. Respondents argue that because no grounds exist
to vacate the award, the Court must confirm the Award pursuant
to9 U.S.C. § 9. Petitioner argues that the Court may not confirm
the Award for two reasons. First, Petitioner argues that the Court
lacks subject matter jurisdiction over Respondents’ cross-
petition; second, Petitioner argues that Respondents’ cross-
petition was improperly filed. Because both of those arguments
are without merit, as discussed below, I confirm the Award in
accordance with 9 U.S.C. § 9.
1. Whether the Court Has Subject Matter Jurisdiction
Petitioner contends that the Court lacks subject matter
jurisdiction because (1) there was no agreement between the
parties regarding the entry of judgment after an award in
arbitration, (2) there was no agreement between the parties to
arbitrate disputes, (3) there was no agreement between the
parties to arbitrate employment disputes, and (4) Petitioner
lacked the authority, under New York law, to continue in the
arbitration after Mr. Halligan’s death. Because I have already
determined that the last oi these contentions 1s without merit,
see Apnl 14, 1997 Opinion and Order at 10-13, I address the
remainder of Petitioner’s contentions below.
First, Petitioner argues that this Court has no jurisdiction
because Mr. Halligan and Respondents did not enter into an
agreement providing for entry of judgment after an award in
arbitration. Petitioner admits that Mr. Halligan signed a Uniform
Submission Agreement with the National Association of
————————————— ne
23a |
Appendix C
Securities Dealers (the “NASD”), which submitted the dispute
between Mr. Halligan and Respondents to arbitration and
specifically provided that “a judgment and any interest due
thereon may be entered upon [an award] and, for these purposes,
the undersigned parties hereby voluntarily consent to submit
to the jurisdiction of any court of competent jurisdiction which
may properly enter such judgment.” Petitioner’s argument that
the Uniform Submission Agreement does not provide for entry
of judgment in this case because it was not an agreement
between Respondents and Petitioner, but rather, an agreement
between the NASD and Petitioner, is without merit. All parties
to the arbitration at issue here signed the Uniform Submission
Agreement, and all understood that the terms of that Agreement
would govern the arbitration.
Second, Petitioner argues that this Court is without
jurisdiction because the only agreement to arbitrate that was
signed by Mr. Halligan was contained in his 1985 Form U-4.
an application for registration as a securities dealer, rather than
in a contract between Mr. Halligan and Respondents. However.
as Respondents note, the Uniform Submission Agreement
|. 1 note that neither party presented the Court with a copy of the
Uniform Submission Agreement signed by Mr. Halligan. Respondents
attached one copy of that Agreement signed by Marvin Geisness, and
one copy of that Agreement signed by a representative of Piper Jaffray,
as Exhibit 2 to Jill L. Rosenberg’s Affirmation in Opposition to the
Petition to Vacate the Award in Arbitration. However, because Petitioner
does not dispute that Mr. Halligan signed the Uniform Submission
Agreement, see Pet. Mem. in Opp. at 3-4, the Court considers the terms
of the Uniform Submission Agreement as binding on Mr. Halligan.
Petitioner’s argument that the Uniform Submission Agreement is not
binding on her because the Agreement contains no provision that it is
binding upon Mr. Halligan’s successors or executors is without merit
for the reasons stated in this Court’s April 14, 1997 Opinion and Order.
24a
Appendix C
signed by Mr. Halligan and Respondents may serve as the
parties’ contract to arbitrate. See, e.g., Mihalakis v. Pacific
Brokerage Services, Inc., 1991 WL 280236, * 3 (S.D.N.Y.
December 23, 1991) (Haight, J.); Shearson Lehman Brothers,
Inc. v. Neurosurgical Associates of Indiana, 896 F. Supp. 844,
846 n. 2 (S.D. Ind. 1995). Whether or not the parties have an
independent agreement to arbitrate disputes, the decision by
Mr. Halligan and Respondents each to sign the Uniform
Submission Agreement constitutes an independent agreement
to arbitrate their dispute.
Finally, Petitioner’s argues that because the Uniform
Submission Agreement does not provide that the parties
arbitrate employment disputes, it cannot constitute the parties’
contract to arbitrate. That argument is meritless; again,
Petitioner has failed to understand the nature of the Uniform
Submission Agreement. The Uniform Submission Agreement,
bearing the caption “In the Matter of the Arbitration Between
[claimant] Theodore Halligan [and] [respondents] Piper Jaffray
Inc. [and] Marvin Geisness,” states that the parties “hereby
submit the present matter in controversy, as set forth in the
attached statement of claim, answers, cross claims and all
related counterclaims and/or third party claims which may be
asserted, to arbitration.” Although neither party has submitted
the attached statement of claim or other attached documents,
Petitioner does not allege that there is any dispute between Mr.
Halligan and Respondents other than Mr. Halligan’s age
discrimination in employment claim that was, in fact, the subject
of the arbitration. The plain language of the Uniform
Submission Agreement indicates that the employment dispute
between Mr. Halligan and Respondents — the on/y dispute
between those parties — was the subject of the arbitration, and
that both Mr. Halligan and Respondents, through the signing
25a
Appendix C
of the Uniform Submission Agreement, agreed to submit that
dispute to arbitration. For all of the reasons stated above,
Petitioner’s argument that the Court does not have subject
matter jurisdiction over this action is without merit.
2. Whether the Cross-Petition Was Improperly Filed
Petitioner offers no legal authority to support the
proposition that the petition to vacate the Award and the petition
to confirm the Award may not be heard in one action. Indeed,
Respondents’ decision to file its petition to confirm the Award
aS a Cross-petition within the action brought by Petitioner to
vacate the Award comports with the principles of judicial
economy and efficiency. Courts routinely consider such
petitions together. See, e.g., First Interregional Equity Corp.
v. Haughton, 842 F. Supp. 105 (S.D.N.Y. 1994). For that reason,
I deny Petitioner’s request to strike Respondents’ cross-petition,
and I find that the manner in which the petition to confirm the
Award was presented is no impediment to ruling on the
petition’s merits.
IT. Conclusion
Because no grounds exist upon which to vacate, modify,
or correct the Award, I hereby grant the Cross-petition to
confirm the arbitration award, pursuant to 9 U.S.C. § 9, and I
enter judgment for Respondents. I order the Clerk of Court to
Close this case.”
2. I note that Petitioner in this action has filed a related action in
this Court, and that a motion to dismiss is currently pending in that action.
The Court will decide that motion in a subsequent opinion and order.
Kimba M. Wood
Kimba M. Wood
nited States District Judge
:
;
27a
APPENDIX D — OPINION AND ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK DATED APRIL 14, 1997
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
96 Civ. 4472 (KMW)
IRENE HALLIGAN as Executrix of the Estate of THEODORE
H. HALLIGAN.
Petitioners,
-against-
PIPER JAFFRAY, INC. & MARVIN GEISNESS,
Respondents.
OPINION & ORDER
WOOD, U.S.D.J.
Petitioner Irene Halligan (“Petitioner”) has filed a petition
to vacate an arbitration award made after an arbitration
proceeding brought by her husband, Theodore Halligan (“Mr.
Halligan”), against Piper Jaffray, Inc. and Marvin Geisness
(“Respondents”). For the following reasons, I deny the petition
to vacate.
l. Background
Mr. Halligan was employed by Piper Jaffray, Inc. (“Piper”)
from 1973 to 1992 as an institutional equity salesperson
28a
Appendix D
O’Connell Aff. at § 7. In January of 1993, Mr. Halligan filed a
claim against Piper with the Equal Employment Opportunity
Commission. /d. at § 9. In October of 1993, Mr. Halligan
instituted an arbitration proceeding against Piper and one of its
employees, Marvin Geisness (“Geisness”), before the National
Association of Securities Dealers (the “NASD”), alleging that
he was discharged by Piper due to his age, in violation of both
the Age Discrimination in Employment Act (the “ADEA”) and
certain rights at common law. The extensive hearings on Mr.
Halligan’s claims began in September of 1994. Mr. Halligan
completed his own direct testimony, was cross-examined by
Respondents, and began his own re-direct testimony before the
hearing was postponed to allow other witnesses to testify.
In December of 1994, Mr. Halligan was diagnosed with a
recurrence of oral cancer.' He thus did not appear at the final
sessions of his own case, nor did he appear at the sessions of
Respondents’ case. In April of 1995, the parties stipulated, in
light of Mr. Halligan’s increasingly serious medical condition,
that the brief re-direct testimony he had offered would be
stricken from the record. Mr. Halligan died on October 9, 1995.
He had designated his wife, Petitioner, as his sole Executrix.
Petitioner informed Mr. Halligan’s counsel that she wished
to continue with the arbitration proceeding on behalf of Mr.
Halligan’s estate. On October 16, 1995, Mr. Halligan’s counsel
notified the Panel that Petitioner had authorized counsel to
1. Petitioner, by her attorney, states that this occurred in December
1995, O’Connell Aff. at § 13, and that Mr. Halligan died in October
1996, O’Connell Aff. at § 14. Given the undisputed fact that the
arbitration concluded in October 1995, I note that counsel appears to
mean, respectively, that Mr. Halligan was diagnosed with the recurrence
of oral cancer in December i994, and died in October 1995.
29a
Appendix D
proceed with the arbitration. The arbitration continued. On
March 19, 1995, the Panel made a final decision in the Case,
denying all of Mr. Halligan’s claims. All told, the arbitration
proceeding was extensive, comprised of twenty-six days of
testimony and argument spanning a one year period. Evidence
included more than 240 exhibits and the testimony of at least
twenty-three witnesses. O’Connell Aff. at q 12.
Petitioner now moves to vacate the Award because (1) the
Panel acted in manifest disregard of the law; (2) the Panel was
guilty of misconduct in refusing to hear evidence relevant to
the controversy and through other misbehavior that prejudiced
Mr. Halligan; (3) the Panel was partial; (4) the Award violated
public policy; and (5) the arbitrators exceeded their authority.
I address each argument in turn below.
II. Analysis
A. Standard of Review
A district court’s authority to vacate an arbitration award
is limited by the Federal] Arbitration Act (the “FAA”),9U.S.C.
§ 10. Under the FAA, the court may vacate an arbitration award
for the following reasons:
(1) Where the award was procured by corruption,
fraud, or undue means.
(2) Where there was evident partiality or corruption
in the arbitrators, or either of them.
(3) Where the arbitrators are guilty of misconduct
. In refusing to hear evidence pertinent and
30a
Appendix D
material to the controversy; or of any other
misbehavior by which the nghts of any party have
been prejudiced.
(4) Where the arbitrators exceeded their powers, or
so imperfectly executed them that a mutual, final,
and definite award upon the subject matter submitted
was not made.
9 U.S.C. § 10(a). In addition, a district court may vacate an
arbitration award on the basis of an arbitration panel’s manifest
disregard of the law. Carte Blanche (Singapore) Pte., Ltd. v.
Carte Blanche Int'l, Ltd., 888 F.2d 260 (2d Cir. 1989), quoting
Merrill Lynch Pierce, Fenner, & Smith, Inc. v. Bobker, 808
F.2d 930 (2d Cir. 1986). In order to maintain its well-established
deference to arbitration as a favored method of dispute
resolution between agreeing parties, the Second Circuit has
narrowly interpreted the factors set out in § 10(a), as well as
the manifest disregard of the law standard. See Fahnestock &
Co. v. Waltman, 935 F.2d 512, 516 (2d Cir.), cert. denied, 112
S.Ct. 380, 116 L.Ed.2d 331 (1991); Carte Blanche, 888 F.2d at
265. Furthermore, the party moving to vacate an arbitration
award bears the burden of proof. See Roche v. Local 32-B2/
Serv. Employees Int'l Union, 755 F. Supp. 622, 624 (S.D.N.Y.
1991), citing Andros Compania Maritima v. Marc Rich & Co.,
579 F.2d 691, 700 (2d Cir. 1978).
B. Whether the Panel Demonstrated Manifest Disregard
of the Law
This Court may vacate an arbitration award that was made
with manifest disregard of the law. However, judicial inquiry
under the manifest disregard standard is extremely limited.
3la
Appendix D
Fahnestock, 935 F.2d at 516. In fact, in order for an error to
constitute manifest disregard of the law, it must be “something
beyond and different from a mere error in the law or failure on
the part of the arbitrators to understand or apply the law.” /d.
(citations omitted). An error “must have been obvious and
capable of being readily and instantly perceived by the average
person qualified to serve as an arbitrator” to constitute manifest
disregard of the law. Merril] Lynch, 808 F.2d at 933-34. The
law that a petitioner alleges to have been disregarded “must be
well-defined, explicit, and clearly applicable.” /d. In addition,
the term “manifest disregard” implies that the arbitration panel
“appreciates the existence of a clearly governing legal principle
but decides to ignore or pay no attention to it.” Petitioner argues
that the Panel manifestly disregarded the ADEA, under which
Mr. Halligan brought his age discrimination claims against
Piper. This argument is without merit.
Petitioner contends that the Panel demonstrated a manifest
disregard of the ADEA because it ignored the parties’ respective
burdens of proof under the ADEA. Inan ADEA claim, burdens
of proof are the same as those for a Title VII action under 42
U.S.C. § 2000¢e et seq. Bay v. Times Mirror Magazines, 936
F.2d 112, 116 (2d Cir. 1991). In a traditional case, where a
plaintiff cannot establish the existence of discrimination by
direct evidence, a plaintiff must first establish only a prima
facie case of discrimination by an employer. The employer must
then produce a clear and reasonably specific explanation for
the challenged employment-related decision, but the burden
does not shift to the employer to show that its stated explanation
was the true reason. Bay, 936 F.2d at 116 (2d Cir. 1991), citing
Price Waterhouse vy. Hopkins, 490 U.S. 228, 245, 109 S.Ct.
1775, 1788, 104 L.Ed.2d 268 (1989).
32a
Appendix D
However, in a case where so-called “direct evidence” is
available, courts need not adhere so strictly to this division of
burdens of proof. Rather, when a plaintiff has established by
direct evidence that an illegitimate factor has played a
substantial or motivating role in an employment decision, the
burden falls to the defendant to prove by a preponderance of
the evidence that 1t would have made the same employment
decision even if it had disregarded the illegitimate factor.
However, a plaintiff always bears the ultimate burden of
persuading the trier of fact that the defendant intentionally
discriminated against the plaintiff. Texas Dep't of Community
Affairs v. Burdine, 450 U.S. 248, 253, 101 S.Ct. 1089, 1093-94,
67 L.Ed.2d 207 (1981).
Here, Petitioner contends that because Mr. Halligan based
his claim against Piper on direct evidence of discrimination,
Piper bore the burden of proof to show that his claim was
without merit. Petitioner alleges that Piper failed to contradict
the testimony of Mr. Halligan’s witnesses, failed to raise an
affirmative defense under the ADEA, and failed to show that
Piper would have reached the same decision in the absence of
age discrimination. For those reasons, Petitioner argues, the
Panel’s finding that no discrimination had occurred was made
in manifest disregard of the law. In response, Respondents note
that they did rebut testimony of Mr. Halligan’s witnesses,
directly establishing a credibility issue.
Petitioner's argument that the Panel manifestly disregarded
the law is meritless for two distinct reasons. First, to show
manifest disregard of the law, the Petitioner must demonstrate
that the law was clear, that the Panel knew the law, and that the
Panel ignored the law. Here, the determination of what
constitutes “direct evidence” so that the respondent bears a
33a
Appendix D
heavier burden is a difficult one to make. In addition, the record
of the arbitration proceedings does not indicate the Panel’s
awareness, prior to its determinations, of the standards for
burdens of proof. Second, ina situation such as this, where the
Panel was faced with the task of evaluating conflicting witness
testimony, and where it did not issue a written opinion,’ I cannot
conclude that the Panel did in fact disregard the parties’ burdens
of proof under the ADEA. There is support for Respondents’
argument in the record, although there is also support for
Petitioner’s claim. Determining the credibility of conflicting
witnesses is a key component of an arbitration panel’s duty,
and crediting one witness over another does not constitute
manifest disregard of the law. Fine v. Bear Stearns & Co., Inc.,
765 F. Supp. 824, 828 (S.D.N.Y. 1991). This Court’s role is
not to second-guess the fact-finding done by the Panel. Because
there is factual as well as legal support for the Panel’s ultimate
conclusion, I determine that the Panel did not manifestly
disregard the law, and that the arbitration Award should not be
vacated on that ground.
C. Whether the Panel Was Guilty of Misconduct or Evident
Partiality
A district court may also vacate an arbitration award,
pursuant to 9 U.S.C. § 10(a)(2) and (a)(3), respectively, when
the arbitrators have demonstrated evident partiality or when
2. Itis well settled that an arbitration panel need not supply a written
explanation for its award. United Steelworkers of America v. Enterprise
Wheel & Car Corp., 363 US. 593, 598 (1960). “Arbitrators are not
required to provide the rationale for their award, and ‘courts generally
will not look beyond the lump sum award in an attempt to analyze the
reasoning processes of the arbitrators.’ ” Barbier y. Shearson Lehman
Hutton Inc., 948 F.2d 117, 121 (2d Cir. 1991).
34a
Appendix D
the arbitrators are guilty of either misconduct in refusing to
hear evidence pertinent and material to the controversy or of
any other misbehavior by which the rights of any party have
been prejudiced. Petitioner appears to rest both her claim of
misconduct and her claim of evident partiality by the Panel on
the same set of facts; I therefore consider these claims
simultaneously.
Petitioner’s misconduct and partiality claims rest on her
allegations that the Panel improperly commented on Mr.
Halligan’s case, improperly limited Mr. Halligan’s rebuttal
case, and improperly required Mr. Halligan’s counsel to identify
rebuttal witnesses in advance. All of these arguments are
without merit.
Petitioner relies on a sole comment by the Panel to support
her allegations of partiality and misconduct:
You know, under the rules... you don’t have
as a matter of right the right to rebuttal, a rebuttal
case. You have a right of summation.
Now, the panel has decided to give you or
permit . ou the ability to put on a rebuttal case. But
are you gorng to retry this whole case in rebuttal?
We've heard almost everything.
TR. 4450-4451. Far from commenting on the merits of the
case, this statement by the Panel chairman, taken at its worst,
can only indicate a desire by the Panel to restrict testimony to
3. Citations to the transcript of the arbitration proceeding will be
designated at “TR. _
35a
Appendix D
new information rather than allowing Mr. Halligan to offer
redundant testimony. This is a proper motive for the Panel,
especially in light of the nature of arbitration as an efficient
way to resolve disputes. See, e.g., Merrill Lynch, 808 F.2d at
933-34. The Panel’s comment, therefore, provides no basis for
a finding that it was guilty of misconduct or impartiality.
With regard to Petitioner’s argument that the restriction
on rebuttal time was an act of misconduct by the Panel and
demonstrated the Panel’s partiality, I note that as the Panel
explained, Mr. Halligan did not have an automatic right to
rebuttal in the arbitration proceeding.‘ The Panel granted him
rebuttal time, and was entirely within its authority to limit the
time to ensure that testimony would be presented in an efficient
manner. The Panel granted Mr. Halligan four hours of rebuttal
time, and allowed Respondents four hours for cross-€xamination
of rebuttal witnesses. Mr. Halligan’s counsel called only two
rebuttal witnesses.° Although Mr. Halligan’s counsel may not
have called additional rebuttal witnesses because of the
restriction on time set by the Panel, I note that counsel herself
Stated on the record that any of the Proposed rebuttal witnesses
“could have been direct witnesses.” TR. 4462. For these reasons,
the Panel’s time restriction did not result in prejudice to Mr.
Halligan.
4. Rebuttal was apparently allowed, when appropriate, under the
parties’ arbitration agreement. See Arbitration Procedures, O'Connel]
Aff. Ex. V.
5. Respondents note, and Petitioner does not argue to the contrary,
that Petitioner apparently did not even use the full four hours allotted
by the Panel. Resp. Mem. at 14.
36a
Appendix D
Finally, I note that the Panel’s requirement that Mr.
Halligan’s counsel identify all of her proposed rebuttal
witnesses does not rise to the level of misconduct or partiality.
Again, the Panel was acting within the scope of its authority to
attempt to limit the scope of rebuttal testimony so as not to
duplicate testimony already heard. See, e.g., Grinnell Hous.
Dev. Fund Corp. v. Local 32B032J, Serv. Employees Int'l
Union, 767 F.Supp. 63, 67(S.D.N.Y. 1991); Warnes v. Harvic
Int'l, Ltd., 1995 U.S. Dist. LEXIS 5844, at *10 (S.D.N.Y. 1995):
Fairchild & Co. v. Richmond F. & P.R. Co., 516 F.Supp. 1305,
1315 (D.D.C. 1981).
For the foregoing reasons, I determine that the Panel was
not guilty of misconduct or evident partiality.
D. Whether the Award Violates Public Policy
Petitioner alleges, without elaboration, that the Award
violates public policy by disregarding Piper’s willful and
deliberate violation of the ADEA. I construe this to be a further
argument in support of Petitioner’s allegation that the Panel
evinced a manifest disregard of the law. Because I have already
determined, for the reasons stated above, that the Panel did not
demonstrate a manifest disregard of the law, I find no basis for
determining that the Award violates public policy.
E. Whether the Panel Exceeded Its Authority
Pursuant to § 10 of the Arbitration Act, a court may vacate
an award if the arbitrators exceeded their powers. . . .” 9 U.S.C.
§ 10(d). However, the Second Circuit has strictly limited the
circumstances under which awards should be vacated:
37a
Appendix D
We have consistently accorded the narrowest
readings to the Arbitration Act’s authorization to
vacate awards “[w]here the arbitrators exceeded
their powers,” 9 U.S.C. § 10(d)....
Andros Compania Maritima v. Marc Rich & Co., 579 F.2d 691
703 (2d Cir. 1978).
Petitioner here challenges the Panel’s authority to
adjudicate Mr. Halligan’s claims after his death. citing New
York Civil Practice Laws and Rules (“CPLR”) § 7512, which
provides that upon the death ofa party who has agreed to submit
to arbitration, “proceedings may be ... continued upon the
application of, or upon notice to, his executor.” Petitioner was
named executor in Mr. Halligan’s will, but was not formerly
designated as the executor until June 5, 1996. Therefore.
Petitioner argues, her authorization to continue the arbitration
on October 16, 1995 was not valid under CPLR § 7512 and the
award must be vacated.
Petitioner discussed the arbitration with Mr. Halligan’s
counsel immediately after Mr. Halligan’s death. Counsel asked
whether Petitioner wished to proceed with the arbitration and
Petitioner said that she did. Pet. Aff at { 4. On October 16.
1995, Mr. Halligan’s counsel informed the Panel that Mr
Halligan had died and that “the estate represented by the
executrix Irene Halligan has authorized our firm to continue
this action in the name of the estate.” TR. at 4537. Mr
Halligan’s counsel, who is now Petitioner’s counsel, has stated
that she:
had every reason to believe that a proper substitution
had been effected through the offices of the attorney
38a
Appendix D
who had drawn Halligan’s original will and
obviously would not have proceeded with this
arbitration if there was reason to believe that the
arbitrator's powers had been terminated or that the
hundreds of hours of legal time they had invested
in this arbitration proceeding over two years could
be nullified because they had no authority to act on
behalf of the Estate.
O’Connell Aff. at {| 53. In effect, then, Petitioner seeks to benefit
from a technical loophole — that is, Petitioner proceeded, as
the executrix, in the arbitration, but now attempts to use the
fact that she was not yet officially the executrix when she
proceeded with the arbitration (although she currently is the
executrix) to vacate the Award because it is unfavorable to her.
Strong policy concerns dictate that Petitioner’s efforts to
vacate the Award in this case are inappropriate. As one court
has explained,
To permit a party who has participated fully in the
proceedings to later challenge his obligation to
arbitrate would be manifestly unfair since the award
is otherwise binding on the facts and the law. Having
sought expeditious justice in a contractual forum,
the losing party may not turn around and upset the
arbitration award with a claim that its opponent had
foregone its right to arbitration. The rublic policy
favoring arbitration would be greatly undermined
were the Court to sustain such a ‘heads — I win,
tails — you lose’ objection.
Boston and Maine Corp. v. Illinois Central RR Co., 274 F. Supp.
257, 260 (S.D.N.Y. 1967). The particular facts of this case
39a
Appendix D
compel the Court to conclude that Petitioner’s inconsistent
positions in this litigation and in the underlying arbitration are
impermissible under the doctrine of equitable estoppel. See Jn
the Matter of the Petition of Transrol Navegacao S.A., 782
F. Supp. 848, 853 (S.D.N.Y. 1991).
Courts “agree that equitable estoppel may be applied to
preclude a party from contradicting testimony or pleadings
successfully maintained in a prior judicial proceeding.”® /d.
quoting Konstantinidis v. Chen, 626 F.2d 933, 937 (D.C. Cir.
1980).’ In order to successfully argue that an Opposing party is
estopped from taking a particular position, a party must
(1) have been an adverse party in the prior proceeding, (2) have
acted in reliance on the opponent’s prior position, (3) now face
injury if a court were to permit his opponent to change positions.
Id., citing Merrill Lynch, Pierce. Fenner & Smith Inc. v.
Georgiadis, 903 F.2d 109, 114 (2d Cir. 1990). Here,
Respondents meet these criteria: they were an adverse party to
the arbitration proceeding; they acted in reliance upon
Petitioner’s statement that the arbitration would go forward;
and they will face injury if Petitioner is now allowed to nullify
6. I note that although there is some question as to whether a party
is precluded from taking inconsistent positions when the allegedly
inconsistent party did not prevail in the first proceeding, see Transrol,
782 F. Supp. at 853, what is relevant here is that Petitioner was successful
in representing to the Panel that she was the executrix of the estate, and
successful in convincing the Panel to proceed with the arbitration upon
her stated approval.
7. Although not technically testimony or a formal pleading,
Petitioner's statement to the Panel acted as an authorization to continue
the arbitration proceeding that is akin to a pleading substituting Petitioner
for her husband in the arbitration proceeding.
40a
Appendix D
the extensive and expensive arbitration proceedings after
Respondent obtained a favorable award. For that reason, I now
hold that the Award should not be vacated on the ground that
the Panel exceeded its authority.
Ill. Conclusion
For the foregoing reasons, I hereby deny the petition to
vacate the Award. I note that currently pending is an application
by Respondents in this action to confirm the Award: I will
address that application in a later order.
SCO ORDERED
New York. New York
April 14, 1997
s’ Kimba M. Wood
Kimba M. Wood
United States District Judge
pies of this order have been mailed to counsel! for
4la
APPENDIX E — ORDER OF THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
DENYING PETITION FOR REHEARING DATED AND
FILED OCTOBER 23, 1998
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
UNITED STATES COURT HOUSE
40 FOLEY SQUARE
NEW YORK 10007
CAROLYN CLARK CAMPBELL
CLERK
At a stated term of the United States Court of Appeals for
the Second Circuit, held at the United States Courth
Square, in the City of New York. on the 23rd day
one thousand nine hundred and ninety-eight.
ouse, Foley
of October
Dkt No: 97-780]
Halligan,
Piper Jaffray, Inc
Appellee
A petition for rehearing
be reheard in banc hav
Piper Jaffray, Inc.
containing a suggestion that the action
ing been filed herein by the appellee
43a
APPENDIX F — RELEVANT STATUTES
9 U.S.C. § 1
“Maritime transactions” and “commerce” defined:
exceptions to operation of title
“Maritime transactions”, as herein defined, means
charter parties, bills of lading of water Carriers,
agreements relating to wharfage, supplies furnished
vessels or repairs to vessels, collisions, or any other
matters in foreign commerce which, if the subject
of controversy, would be embraced within admiralty
jurisdiction: “commerce”, as herein defined, means
commerce among the several States or with foreign
nations, or in any Territory of the United States or
in the District of Columbia, or between any such
Territory and another, or between any such Territory
and any State or foreign nation, or between the
District of Columbia and any State or Territory or
foreign nation, but nothing herein contained Shall
apply to contracts of employment of seamen.
railroad employees, or any other class of workers
engaged in foreign or interstate commerce.
9 U.S.C. § 2
Validity, irrevocability and enforcement of
agreements to arbitrate
A written provision in any maritime transaction or
4 contract evidencing a transaction involving
commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction,
or the refusal to perform the whole or any part
44a
Appendix F
thereof, or an agreement in writing to submit to
arbitration an existing controversy arising out of
such a contract, transaction, or refusal, shall be valid,
irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation
of any contract.
9 U.S.C. § 3
Stay of proceedings where issue therein referable
to arbitration
If any suit or proceeding be brought in any of the
courts of the United States upon any issue referable
to arbitration under an agreement in writing for such
arbitration, the court in which such suit is pending,
upon being satisfied that the issue involved in such
suit Or proceeding is referable to arbitration under
such an agreement, shall on application of one of
the parties stay the trial of the action until such
arbitration has been had in accordance with the terms
of the agreement, providing the applicant for the
Stay 1s not in default in proceeding with such
arbitration
9 U.S.C. § 4
Failure to arbitrate under agreement; petition to
United States court having jurisdiction for order to
compel arbitration; notice and service thereof:
hearing and determination
A party aggrieved by the alleged failure, neglect,
or refusal of another to arbitrate under a written
45a
Appendix F
agreement for arbitration may petition any United
States district court which, save for such agreement,
would have jurisdiction under Title 28, in a civil
action or in admiralty of the subject matter of a suit
arising out of the controversy between the parties,
for an order directing that such arbitration proceed
in the manner provided for in such agreement. Five
days’ notice in writing of such application shall be
served upon the party in default. Service thereof
shall be made in the manner provided by the Federal
Rules of Civil Procedure. 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. The
hearing and proceedings, under such agreement,
shall be within the district in which the petition for
an order directing such arbitration is filed. If the
making of the arbitration agreement or the failure,
neglect, or refusal to perform the same be in issue,
the court shall proceed summarily to the trial
thereof. If no jury trial be demanded by the party
alleged to be in default, or if the matter in dispute is
within admiralty jurisdiction, the court Shall hear
and determine such issue. Where such an issue is
raised, the party alleged to be in default may, except
in Cases of admiralty, on or before the return day of
the notice of application, demand a jury trial of such
issue, and upon such demand the court shal] make
an order referring the issue or issues to a jury in the
manner provided by the Federal Rules of Civil
Procedure, or may specially call a jury for that
46a
Appendix F
purpose. If the jury find that no agreement in writing
for arbitration was made or that there 1s no default
in proceeding thereunder, the proceeding shall be
dismissed. If the jury find that an agreement for
arbitration was made in writing and that there is a
default in proceeding thereunder, the court shall
make an order summarily directing the parties to
proceed with the arbitration in accordance with the
terms thereof.
=)
—
7 2)
2)
LI
uw A |
Appointment of arbitrators or umpire
lf in the agreement provision be made for a method
of naming or appointing an arbitrator or arbitrators
Or an umpire, such method shall be followed; but if
no method be provided therein, or if a method be
provided and any party thereto shall fail to avail
himself of such method, or if for any other reason
there shall be a lapse in the naming of an arbitrator
or arbitrators or umpire, or in filling a vacancy, then
upon the application of either party to the
controversy the court shall designate and appoint
an arbitrator or arbitrators or umpire, as the case
may require, who shall act under the said agreement
with the same force and effect as if he or they had
been specifically named therein; and unless
otherwise provided in the agreement the arbitration
shall be by a single arbitrator.
47a
Appendix F
9 U.S.C. § 6
Application heard as motion
Any application to the court hereunder shall be made
and heard in the manner provided by law for the
making and hearing of motions, «xcept as otherwise
herein expressly provided.
9 U.S.C. § 7
Witnesses before arbitrators: fees: compelling
attendance
The arbitrators selected either as prescribed in this
title or otherwise, or a majerity of them, may
summon in writing any person to attend before them
or any of them as a witness and ina proper case to
bring with him or them any book, record, document.
or paper which may be deemed material as evidence
in the case. The fees for such attendance shall be
the same as the fees of witnesses before masters of
the United States courts. Said summons shall issue
in the name of the arbitrator or arbitrators. or a
majority of them, and shall be signed by the
arbitrators, or a majority of them, and shall be
directed to the said person and shall be served in
the same manner as subpoenas to appear and testify
before the court; if any person or persons so
summoned to testify shall refuse or neglect to obey
said summons, upon petition the United States
district court for the district in which such
arbitrators, or a majority of them, are sitting may
48a
Appendix F
compel the attendance of such person or persons
before said arbitrator or arbitrators, or punish said
person or persons for contempt in the same manner
provided by law for securing the attendance of
witnesses or their punishment for neglect or refusal
to attend in the courts of the United States.
9 U.S.C. § 8
Proceedings begun by libel in admiralty and seizure
of vessel or property
If the basis of jurisdiction be a cause of action
otherwise justiciable in admiralty, then,
notwithstanding anything herein to the contrary, the
party claiming to be aggrieved may begin his
proceeding hereunder by libel and seizure of the
vessel or other property of the other party according
to the usual course of admiralty proceedings, and
the court shall then have jurisdiction to direct the
parties to proceed with the arbitration and shall
retain jurisdiction to enter its decree upon the award.
9 U.S.C. § 9
Award of arbitrators; confirmation; jurisdiction;
procedure
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
ik Ni aliiiiaiiia as.
49a
Appendix F
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. Notice
of the application shall be served upon the adverse
party, and thereupon the court shall have jurisdiction
of such party as though he had appeared generally
in the proceeding. If the adverse party is a resident
of the district within which the award was made,
such service shall be made upon the adverse party
or his attorney as prescribed by law for service of
notice of motion in an action in the same court. If
the adverse party shall be a nonresident, then the
notice of the application shall be served by the
marshal of any district within which the adverse
party may be found in like manner as other process
of the court.
9 U.S.C. § 10
Same; vacation; grounds; rehearing
(a) In any 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 —
(1) Where the award was procured by
corruption, fraud, or undue means.
Appendix |
(2) Where there was evident partiality o1
ruption in the arbitrators, or either of them.
(3) Where the arbitrators were guilty of
misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy;
or of any other misbehavior by which the rights of
any party have been prejudiced
(4) Where the arbitrators exceeded their
powers, or so imperfectly executed them that a
mutual, final, and definite award upon the subject
matter submitted was not made
(5) Where an award 1s vacated and the time
within which the agreement required the award to
be made has not expired the court may, in its
discretion, direct a rehearing by the arbitrators.
(b) The United States district court for the district
wherein an award was made that was issued pursuant
to section 580 of title 5 may make an order vacating
the award upon the application of a person, other
than a party to the arbitration, who 1s adversely
affected or aggrieved by the award, if the use of
arbitration or the award 1s clearly inconsistent with
the factors set forth in section 572 of title S.
9 U.S.C. § 11
Same; modification or correction, grounds; order
In either of the following cases the United States
court in and for the district wherein the award was
Sla
Appendix F
made may make an order modifying or correcting
the award upon the application of any party to the
arbitration —
(a) Where there was an evident materia]
miscalculation of figures or an evident material
mistake in the description of any person, thing, or
property referred to in the award.
(b) Where the arbitrators have awarded upon a
matter not submitted to them, unless it is a matter
not affecting the merits of the decision upon the
matter submitted.
(c) Where the award is imperfect in matter of
form not affecting the merits of the controversy
[he order may modify and correct the award. so a:
to effect the intent thereof and promote justice
between the parties.
9 U.S.C. § 12
Notice of motions to vacate o1 modify; service; stay
of proceedings
Notice of a motion to vacate. modify, or correct ar
award must be served upon the adverse party or his
attorney within three months after the award is filed
or delivered. If the adverse party is a resident of the
district within which the award was made. such
service shall be made upon the adverse party or his
attorney as prescribed by law for service of notice
judgment so
<
entered
i
eilect, in all respects,
nall have the same {
as, and
id be subject to ;
ne provisions of law relating to, a judgment in
¢ : . n . 7 c 4 | . ; in
0n, and it may be enforced as if it had t
rer ’ ty - ti r n >
( | ‘ r
: ».4 .
, ePTN En Ft + : hitra . r »rmmont rm rry
> \ we a a 444 rs S@e24/4414 C4 to. 4 ww i . Lo ss
iroitral awards, and execution upon juden
€d on orders confirming such awards sha
n the basis of the Act of St
~ & i.
54a
Appendix F
(B) denying a petition under section 4 of
this title to order arbitration to proceed,
(C) denying an application under section
206 of this title to compel arbitration,
(D) confirming or denying confirmation
of an award or partial award, or
(E) modifying, correcting, or vacating an
award;
(2) an interlocutory order granting, continuing,
or modifying an injunction against an arbitration that
is subject to this title; or
(3) a final decision with respect to an
arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b)
of title 28, an appeal may not be taken from an
interlocutory order —
(1) granting a stay of any action under section
3 of this title;
(2) directing arbitration to proceed under
section 4 of this title;
(3) compelling arbitration under section 206 of
this title; or
(4) refusing to enjoin an arbitration that is
subject to this title.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.