Patten v. Signator Ins. Agency, Inc.

• Decision Date: 13 March 2006
• Docket Number: No. 05-1148.,05-1148.
• Citation: 441 F.3d 230
• Parties: Ralph F. PATTEN, Jr., Plaintiff-Appellant, v. SIGNATOR INSURANCE AGENCY, INCORPORATED; Signator Investors, Incorporated; John Hancock Mutual Life Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

441 F.3d 230

Ralph F. PATTEN, Jr., Plaintiff-Appellant, v. SIGNATOR INSURANCE AGENCY, INCORPORATED; Signator Investors, Incorporated; John Hancock Mutual Life Insurance Company, Defendants-Appellees.

No. 05-1148.

United States Court of Appeals, Fourth Circuit.

Argued: February 2, 2006.

Decided: March 13, 2006.

John Michael Shoreman, McFadden & Shoreman, Washington, D.C., for Appellant. Michael Joseph Murphy, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Washington, D.C., for Appellees.

Before WIDENER, LUTTIG, and KING, Circuit Judges.

Vacated and remanded by published opinion. Judge KING wrote the majority opinion, in which Judge WIDENER joined. Judge LUTTIG wrote a dissenting opinion.

OPINION

KING, Circuit Judge:

Appellant Ralph F. Patten, Jr., appeals from the district court's denial of his motion to vacate an arbitration award rendered in favor of John Hancock Mutual Life Insurance Company, Signator Insurance Agency, Incorporated, and Signator Investors, Incorporated (collectively the "respondents"). Patten v. Signator Ins. Agency, Inc., No. 02-1745 (D.Md. Jan. 4, 2005). By this appeal, Patten seeks only to vacate that aspect of the arbitration award dismissing as time-barred his claims against Signator Investors. Patten asserts that the arbitrator acted without authority when he unilaterally imposed an implied one-year limitations period onto the governing arbitration agreement between Patten and Signator Investors. As explained below, the arbitration agreement does not explicitly prescribe any limitations period with respect to an arbitration demand, and it supersedes all other agreements between the parties. In the circumstances presented, the arbitrator's ruling constituted a manifest disregard of the law and was not drawn from the essence of the governing arbitration agreement. As a result, we vacate the district court's refusal to vacate the arbitration award as to Signator Investors, and we remand for further proceedings.

I.

A.

Patten first began working as a sales agent for Hancock in the Washington, D.C. area in 1972. In 1989, he became a General Agent for Hancock in Bethesda, Maryland. In 1992, he entered into an agreement with Hancock and its affiliates, designated as a "Mutual Agreement to Arbitrate Claims" (the "Mutual Agreement"). J.A. 18.¹ The Mutual Agreement required, inter alia, that any claims arising between Patten and Hancock (or any of Hancock's affiliates or subsidiaries) were to be resolved by mandatory arbitration. The Mutual Agreement specifically provided, in a section captioned "Required Notice of all Claims and Statute of Limitations," that an "aggrieved party must give written notice of any claim to the other party within one (1) year of . . . the event giving rise to the claim," or the claim would be deemed waived. Id. It is undisputed that Signator Investors was an "affiliate" of Hancock and thus a party to the Mutual Agreement.

In 1998, Patten entered into a new and superseding agreement with Signator Investors, to become its branch manager in Bethesda (the "Management Agreement").² The Management Agreement provided, inter alia, that "Signator [Investors] and Branch Manager [Patten] mutually consent to the resolution by arbitration of all claims or controversies." Management Agmt. ¶ 11. The Management Agreement was silent, however, on any requirements of timing or manner with respect to an arbitration demand. The Management Agreement also provided that it "supersedes all previous agreements, oral or written, between the parties hereto regarding the subject matter hereof." Id. at ¶ 12. Finally, the Management Agreement mandated that it was to "be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts." Id. at ¶ 13.

On October 18, 1999, Hancock reprimanded Patten for alleged deficiencies in his performance as a General Agent — specifically, for advancing premiums on behalf of his clients, in violation of company policy. On December 13, 2000, the respondents each terminated Patten, effective January 2, 2001. On August 2, 2001, Patten sent a letter to the respondents advising them that he had been wrongfully terminated and discriminated against because of his age, and that he was preparing to file a lawsuit on the basis of these claims. The respondents, by letter of August 30, 2001, advised Patten that his allegations were "unequivocally denie[d]," and the parties then apparently entered into unsuccessful settlement negotiations.

On March 4, 2002, Patten forwarded the respondents a demand for arbitration, asserting claims of discrimination, wrongful termination, and breach of contract. On March 13, 2002, the respondents informed Patten by letter that they would not arbitrate because his demand for arbitration was made fourteen months after his termination, and thus was not "timely or proper" under the Mutual Agreement's one-year limitations period. On March 14, 2002, Patten replied that the Management Agreement (rather than the Mutual Agreement) governed his claims against Signator Investors, and that he would seek judicial enforcement of his rights if the respondents refused to arbitrate.

B.

On May 20, 2002, Patten filed a complaint for enforcement of arbitration in the District of Maryland, seeking to compel arbitration. The parties thereafter filed cross-motions for summary judgment and, on November 5, 2002, the court ruled in favor of Patten and directed the respondents to submit to arbitration. Patten v. Signator Ins. Agency, Inc., No. 02-1745, slip op. at 1 (D.Md. Nov. 5, 2002). Because the court concluded that arbitration should be compelled "under the Mutual Agreement, the Court [found] it unnecessary to address Plaintiff's argument regarding the Management Agreement." Id. In its opinion, the court observed that all other questions concerning the arbitration — including the satisfaction of time and notice requirements — were "within the arbitrator's purview." Id. at 2.

The parties entered into arbitration in 2003 under the auspices of the American Arbitration Association (the "AAA"). On January 24, 2003, Patten filed a demand for arbitration with the AAA, making allegations of (1) wrongful termination, (2) breach of contract, (3) breach of the implied covenant of good faith and fair dealing, and (4) unlawful discrimination in violation of federal law as well as the law of Massachusetts and Maryland. After selecting an arbitrator under the procedures of the AAA, the parties engaged in discovery and exchanged witness lists. On December 8, 2003, the respondents filed a motion for summary judgment in the arbitration proceedings, asserting, inter alia, that Patten had failed to comply with the one-year notice provision of the Mutual Agreement. On December 18, 2003, Patten filed an opposition to the respondents' summary judgment request, asserting that the arbitration proceedings arose under both the Management Agreement and the Mutual Agreement. Patten contended that he had complied with the applicable notice requirements of each agreement — maintaining that his August 2, 2001 letter substantially complied with the one-year notice requirement in the Mutual Agreement, and that the Management Agreement contained no limitations period governing when an arbitration demand was to be made.³

By his arbitration award of January 10, 2004, the arbitrator dismissed the arbitration proceedings as time-barred and entered summary judgment for the respondents, without conducting a hearing on the merits. See Arb. Award at 6.⁴ As a preliminary matter, he determined that the arbitration proceedings were governed by both the Mutual Agreement and the Management Agreement. While the arbitrator accurately observed that the Management Agreement contained no notice requirement, he determined that it "necessarily contain[ed] an implied term limit." Id. The arbitrator then "look[ed] to the Mutual Agreement for guidance," and "adopt[ed]" its one-year limitations period. Id. at 7.⁵ Because Patten sent his demand for arbitration fourteen months after his termination in January 2001, the arbitrator dismissed Patten's claims "on the sole ground that Claimant's March 4, 2002 Demand for Arbitration is time-barred." Id. at 7.

C.

On April 9, 2004, Patten filed a motion in the district court proceedings seeking to vacate the arbitration award's determination that the claims in arbitration under the Management Agreement were time-barred. By this motion, Patten contended that the arbitrator had acted in manifest disregard of the law, and had failed to draw his award from the essence of the agreement, by concluding that the Management Agreement contained an implied one-year limitations period on the filing of an arbitration demand. Patten asserted that the Management Agreement explicitly provided that it "supersede[d]" all previous agreements, and its lack of any limitations period had to be construed against Signator Investors, which had drafted it. On January 4, 2005, the district court denied the motion to vacate, concluding that the arbitrator had not ignored any governing legal principles, and that, in any event, an arbitrator's misinterpretation of an arbitration agreement is not a basis for vacating an arbitration award. Patten v. Signator Ins. Agency, Inc., No. 02-1745, slip op at 3 (D.Md. Jan. 4, 2005). Patten has filed a timely notice of appeal, and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

II.

The process and extent of federal judicial review of an arbitration award are substantially circumscribed. As a general proposition, a federal court may vacate an arbitration award only upon a showing of one of the grounds specified in the Federal Arbitration Act, see 9 U.S.C. § 10(a),⁶ or upon a showing of certain limited common law grounds. The permissible common law grounds for vacating such an award, which constitute the essential premises of this appeal, include those circumstances where an award fails to draw its essence from the...