ARW Exploration Corp. v. Aguirre, 94-6023

Citation45 F.3d 1455
Decision Date23 January 1995
Docket NumberNo. 94-6023,94-6023
PartiesARW EXPLORATION CORPORATION, Plaintiff-Appellant, v. Cesar V. AGUIRRE; Anastasios Andriopoulos; Charles E. Bender; B.W. Covington; Chris Dalamangas; P. Elaportas; George Ioannides; Kyriakos Ioannides; V. Kaltsas; Christos P. Kartsonis; Demetrious Kartsonis; A. George Magouliotis; A. Papathanasopolous; Steve Poulos; S.L. Prabhu; Neal Roth; Dorothy Roychoudhury; S.L. Stogiannis; G. Vallianos; and Indumathi Ponnapali, as personal representative of the estate of Ponnapalli Ramakrishna, Defendants/Third-Party Plaintiffs-Appellees, v. Spyridon ARMENIS, also known as Spiro Armenis, Third-Party Defendant-Appellant. Cesar V. AGUIRRE; Anastasios Andriopoulos; Charles E. Bender; B.W. Covington; Chris Dalamangas; P. Elaportas; George Ioannides; Kyriakos Ioannides; V. Kaltsas; Christos P. Kartsonis; Demetrious Kartsonis; A. George Magouliotis; A. Papathanasopolous; Steve Poulos; S.L. Prabhu; Neal Roth; Dorothy Roychoudhury; S.L. Stogiannis; G. Vallianos; and Indumathi Ponnapali, as personal representative of the estate of Ponnapalli Ramakrishna, Plaintiffs-Appellees, v. ARW EXPLORATION CORPORATION and Spyridon Armenis, also known as Spiro Armenis, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Jack R. Durland, Jr., Berry & Durland, Oklahoma City, OK, for appellants.

Ricki V. Sonders (David R. Widdoes with her, on the brief), Day, Edwards, Federman, Propester & Christiansen, Oklahoma City, OK, for appellees.

Before BALDOCK, LOGAN, and BURCIAGA, * Senior District Judge.

BURCIAGA, Senior District Judge.

Defendants-Appellants ARW Exploration Corporation ("ARW") and Spyridon Armenis ("Armenis") appeal the district court's submission of the parties' disputes to binding arbitration and the district court's subsequent confirmation of the ensuing arbitration award.

Plaintiffs-Appellees are twenty individual investors who purchased interests in one or more of six related oil and gas ventures. ARW and Armenis, the sole shareholder and president of ARW, promoted and operated these oil and gas ventures. In September of 1990, Plaintiffs filed a complaint against Defendants with the Florida office of the American Arbitration Association ("AAA"), alleging violations of federal and state securities laws, the Florida Civil Remedies for Criminal Practices Act, common law fraud, and breach of fiduciary duty and contract. On September 28, 1990, ARW filed a complaint in federal district court for the Western District of Oklahoma for a declaration of the arbitrability of Plaintiffs' claims and other related injunctive relief (D.C. No. 90-1598). In response, Plaintiffs moved to compel Defendants to arbitrate all disputes and to compel Armenis specifically to arbitration by way of a third-party complaint. In the meantime, the arbitration proceeding was transferred to Oklahoma City.

On January 2, 1991, the district court dismissed ARW's complaint on grounds that a Florida state court had previously issued an order to compel arbitration. ARW appealed from this dismissal order. This Court reversed and remanded for the district court to make its own determination of arbitrability. ARW Exploration Corp. v. Aguirre, 947 F.2d 450, 455 (10th Cir.1991).

On March 8, 1991, and while the appeal to the Tenth Circuit was pending, Plaintiffs filed a complaint in the federal district court for the Middle District of Florida against Defendants on the same set of facts as contained in the AAA complaint and seeking the same relief, but without asserting a claim for breach of contract or breach of fiduciary duty and omitting a related defendant, A & W Drilling & Equipment Company. Meanwhile, the Oklahoma district court dismissed Plaintiffs' third-party complaint against Armenis on November 22, 1991. On December 2, 1991, the Florida federal district court transferred Plaintiffs' case to the federal court in Oklahoma, which consolidated the case, D.C. No. 91-1980, with D.C. No. 90-1598 for all purposes on February 3, 1992.

After entertaining arguments in the consolidated case, the district court ordered on July 9, 1992 that all claims in the consolidated case were arbitrable against ARW and Armenis. Richard E. Coulsen, an AAA-selected and accredited arbitrator and professor On the day of this conference, Defendants' counsel transmitted by facsimile a motion to the arbitrator seeking leave to withdraw as counsel and a 60-day continuance of the hearing. Defense counsel stated that counsel needed more time to prepare for the hearing because counsel could not contact Armenis as he was "traveling overseas." Counsel gave no other reason or explanation. The arbitrator denied both requests at the pre-hearing conference and so notified defense counsel.

of law, conducted the arbitration proceeding in Oklahoma City. On January 28, 1993, the arbitrator designated April 5, 1993 as the first day of the arbitration proceeding. The arbitrator confirmed this date on February 16, 1993. On March 26, 1993, the arbitrator gave notice of the time and place of a pre-hearing conference, to take place on April 1, 1993.

Neither Defendants nor defense counsel attended the pre-hearing conference or the arbitration hearing. The arbitrator received Plaintiffs' evidence for several days. On May 14, 1993, the arbitrator issued an award for Plaintiffs. On May 25, 1993, Plaintiffs moved for confirmation of the award in the district court and Defendants objected. On December 10, 1993, the district court confirmed the award over Defendants' objections, denied Defendants' motion to vacate or modify the award, and entered judgment on December 13, 1993.

Five of the six joint venture agreements between the parties contained an identical arbitration clause:

If during the course of the venture, the parties are unable to agree on any matter with respect to which a decision must be made; or if on termination, no satisfactory arrangement can be made for settlement of each party's interest in the venture, the dispute or disputes shall be subject to binding arbitration. Any matter in dispute which is not provided for in this agreement or in the Joint Operating Agreement shall be settled by arbitration, in accordance with the rules of the American Arbitration Association. The arbitration decision will be final and binding upon the parties.

One joint venture agreement, however, contained no arbitration clause: the "IFA" Agreement. Defendant Armenis signed all joint venture agreements in his capacity as president of ARW and also signed the IFA Agreement in his individual capacity.

Defendants filed the present appeal and allege numerous reversible errors. First, Armenis contends the district court should have dismissed this action against him in his individual capacity because Plaintiffs did not serve process upon him until 220 days after Plaintiffs filed their complaint in the Florida action. Alternatively, Armenis asserts that even if Plaintiffs had good cause for an extension of time in which to serve process, Armenis was immune from service at the time in question. Second, Armenis argues the district court should not have subjected him to arbitration in his individual capacity without first piercing the ARW corporate veil or determining whether ARW was his alter ego under traditional principles of corporate law. Third, Defendants posit that the district court erred in consolidating all six joint venture agreements into a single arbitration proceeding. Fourth, Defendants contend the district court should not have submitted the IFA Agreement to binding arbitration because that agreement had no arbitration clause. Fifth, Defendants argue the arbitrator exceeded his authority because he erroneously (1) determined that the applicable statutes of limitations did not bar Plaintiffs' claims; (2) failed to require Plaintiffs to return the securities at issue to Defendants; (3) awarded damages to investors without deducting income Plaintiffs received; and (4) determined that the ventures were "securities" within the meaning of the federal securities laws. Finally, Defendants contend the arbitrator abused his discretion in refusing to continue the arbitration hearing and in refusing to provide notice of the hearing date to not only defense counsel, but also to Defendants personally.

This Court has jurisdiction over this appeal pursuant to 28 U.S.C. Sec. 1291. We affirm in part, reverse in part, and remand.

I.

We first address whether the district court erred in failing to rule on Armenis' motion to If a service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint and the party on whose behalf such service was required cannot show good cause why such service was not made within that period, the action shall be dismissed as to that defendant without prejudice....

dismiss on grounds that service occurred 220 days after Plaintiffs filed their complaint. Armenis filed a motion to dismiss on November 4, 1991 on grounds of defective service. Specifically, Armenis argued to the district court that service in the Florida case was defective because it occurred 100 days after the 120-day deadline specified in then-applicable 1 Fed.R.Civ.P. 4(j):

The district court did not address Armenis' objection to service in its July 9, 1992 order compelling Armenis and ARW to binding arbitration. In fact, the district court did not rule on the motion to dismiss at all until the December 10, 1993 order confirming the arbitrator's award--and even then, the district court only disposed of the contention of whether Armenis was immune from service in Florida at the time he was served (addressed in the next section, infra ). At no time did the district court make any findings concerning whether Plaintiffs had good cause for extending the 120-day deadline.

Plaintiffs argue that the district court impliedly denied the motion to dismiss on grounds of untimely service because Plaintiffs had good cause;...

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