Uhl v. Komatsu Forklift Co., Ltd.

• Decision Date: 09 January 2008
• Docket Number: No. 07-1044.,07-1044.
• Citation: 512 F.3d 294
• Parties: Donna UHL, Individually and as Personal Representative of the Estate of Lynn Uhl, Plaintiff-Appellee, Pacific Employer's Insurance Company, Intervenor-Plaintiff-Appellee, v. KOMATSU FORKLIFT COMPANY, LTD.; Komatsu Forklift, U.S.A., Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

512 F.3d 294

Donna UHL, Individually and as Personal Representative of the Estate of Lynn Uhl, Plaintiff-Appellee, Pacific Employer's Insurance Company, Intervenor-Plaintiff-Appellee, v. KOMATSU FORKLIFT COMPANY, LTD.; Komatsu Forklift, U.S.A., Inc., Defendants-Appellants.

No. 07-1044.

United States Court of Appeals, Sixth Circuit.

Argued: November 2, 2007.

Decided and Filed: January 9, 2008.

ARGUED:

Fred J. Fresard, Bowman & Brooke, Troy, Michigan, for Appellants. David R. Skinner, Skinner Professional Law Corp., Bay City, Michigan, for Appellee.

ON BRIEF:

Fred J. Fresard, Bowman & Brooke, Troy, Michigan, for Appellants. David R. Skinner, Skinner Professional Law Corp., Bay City, Michigan, for Appellee.

Before: SILER, MOORE, and GILMAN, Circuit Judges.

OPINION

KAREN NELSON MOORE, Circuit Judge.

In this case, the appellants challenge the validity of an arbitration award where one of the party-selected arbitrators had previously and occasionally served as co-counsel with the attorney representing the intervening plaintiff in the instant case. Because we conclude that this relationship did not violate the arbitration agreement or rise to the level of evident partiality, we AFFIRM the district court's judgment.

I. BACKGROUND

On December 17, 2001, Lynn Uhl was using a forklift manufactured by the Komatsu Forklift Company¹ ("Komatsu") when the forklift allegedly "malfunctioned and failed resulting in severe injuries . . . which ultimately resulted in his death." Joint Appendix ("J.A.") at 16 (Compl.¶ 4). This case is largely one of procedure and not substance; thus, the circumstances of, and Komatsu's influence on, the events that caused Lynn Uhl's death are not at issue in this appeal. Instead, this appeal concerns the fairness and equity of the legal wrangling that followed.

On June 21, 2004, Donna Uhl ("Uhl"), individually and as personal representative of the estate of Lynn Uhl, filed a tort action against Komatsu in the U.S. District Court for the Eastern District of Michigan. Shortly thereafter, the parties stipulated to Pacific Employer's Insurance Company's ("Pacific") intervention as a plaintiff. Attorney Roy Johnson ("Johnson") represented Pacific.²

After nearly a year of discovery, on November 8, 2005, the parties agreed to binding arbitration. As part of the parties' stipulation, they set a deadline of January 31, 2006, for the conclusion of the arbitration. Concurrent with the stipulation to use binding arbitration, the district court dismissed the case, although the district court retained jurisdiction until February 28, 2006, "to review and enforce or vacate any arbitral award." J.A. at 57-58 (Nov. 14, 2005, Order of Dismissal).

The parties, however, were unable to agree on an arbitration agreement that would govern the proposed arbitration, and each side blames the other for the failure. Regardless of the causes, by March 30, 2006, well after the deadline for arbitration, there was still no arbitration agreement among the parties, and Uhl and Pacific filed a motion to compel arbitration. In response, Komatsu argued that the district court no longer had jurisdiction over the case because the district court retained jurisdiction over the arbitration for only a limited (and expired) time frame, and for only a limited set of issues. The district court denied Uhl and Pacific's motion to compel arbitration, but reinstated the case to the active docket. On appeal the parties do not contest this ruling.

Discovery continued during the course of this protracted debate. On December 16, 2005, the parties deposed Peter Barroso ("Barroso"). Barroso later testified that, during his deposition, Fred Fresard ("Fresard"), counsel for Komatsu, noted to Johnson that he was aware that the plaintiffs were going to nominate Martin Stein ("Stein") as their party-selected arbitrator. Barroso also claims that Fresard indicated his awareness that Stein and Johnson had worked together on prior cases. Fresard does not dispute Barroso's statement but claims that Johnson told him only "that he had represented the intervening plaintiff in one or two cases in which Martin Stein represented the plaintiff." J.A. at 237 (Fresard Aff. ¶ 6). Fresard claims that Johnson never told him that Johnson and Stein had ever acted as co-counsel. J.A. at 238 (Fresard ¶ 7).

Only ten days after the district court reinstated the case to the active docket, the parties signed an arbitration agreement. The agreement provided for three arbitrators; each party would nominate one and the party-selected arbitrators would pick a third, neutral arbitrator. The agreement required that the party-selected arbitrators be "practicing attorney[s] possessing experience in judicial litigation, a substantial portion of which experience shall involve product liability matters." J.A. at 110 (Agreement ¶ 1). The agreement also imposed ethical constraints on the arbitrators:

2. Ethical Requirements. The Arbitrators shall have no financial or personal interest in the result of this Arbitration. Prior to selecting the neutral arbitrator, the party-selected arbitrators shall disclose to all parties any referral agreements, financial dealings, or other relationships with any of the parties or parties' attorneys that could in any way be construed as a possible conflict of interest. After such disclosure, either party may demand that the conflicted arbitrator recuse him/herself, and a new arbitrator will be selected by the party who originally selected the recused arbitrator.

J.A. at 110 (Agreement ¶ 2).

The arbitration agreement also imposed limits on the parties' post-award rights. The agreement stated that "[t]here can be no appeal from any decision made by the arbitrators except a claim of fraud or that the arbitrators, parties or their attorneys violated one of the provisions of this Agreement." J.A. at 111 (Agreement ¶ 7). Similarly, the agreement stated that "[t]he award shall be exclusive, final, and binding to all issues and claims that were raised or could have been raised in Plaintiff's and Defendants' respective pleadings," J.A. at 113 (Agreement ¶ 28), and that "the Arbitrators' award will be exclusive, final, and binding," J.A. at 114 (Agreement ¶ 33).

In mid-August 2006, the arbitration hearing began. Komatsu subsequently alleged that there were several incidents during the hearing that indicated bias on the part of Stein. First, Komatsu claims that a paralegal at the hearing overheard Stein tell the other arbitrators "[t]hat Fresard is a prick." J.A. at 252-53 (Dec. 7, 2007, Mot. to Enf. Award Hr'g Tr. at 12:23-13:5). Second, Komatsu claims that Stein closed his eyes during Komatsu's arguments and did not pay attention to its attorneys. Third, Komatsu claimed that Stein did not inspect the forklift with the other arbitrators until Komatsu's attorneys found him in the hotel. Fourth, Komatsu claimed that several evidentiary decisions by the panel of arbitrators were suspect and that Stein "always argued for the Plaintiffs' motion." J.A. at 256 (Hr'g at 16:2-23). Komatsu, however, did not object to any of these alleged events during the arbitration hearing.

After the hearing, while the parties waited for the arbitrators' decision, the parties stipulated to dismiss the tort-action lawsuit. In response, the district court dismissed the case with prejudice but once again retained jurisdiction "to review and enforce or vacate the arbitral award." J.A. at 121-22 (Aug. 30, 2006, Order of Dismissal).

On September 12, 2006, the arbitrators announced an award of $1.9 million for Uhl and Pacific. Komatsu claims that the size of the award provoked its suspicions, and it soon discovered that Stein and Johnson had a professional relationship that included at least two occasions when Stein and Johnson served together as co-counsel. On September 27, 2006, Komatsu filed a motion to vacate the arbitration award. Komatsu claimed, as it does here, that Stein's decision not to disclose his prior relationship with Johnson entitled Komatsu to rescission of the arbitration agreement. Komatsu also argued, as it does here, that Stein's decision not to disclose his prior relationship with Johnson was a violation of the Federal Arbitration Act ("FAA"), requiring the district court to vacate the award.

At a hearing to evaluate the motion to vacate, the district court questioned Johnson about the extent of his relationship with Stein. Johnson told the court that he never had a financial relationship with Stein, a referral fee with Stein, or used Stein as an arbitrator before the instant case. J.A. at 270 (Hr'g at 30:7-24).

On December 8, 2006, the district court confirmed the arbitration award and denied Komatsu's motion to vacate. The district court evaluated Stein's obligations under the FAA and concluded that Stein did not violate the FAA's provisions. In evaluating Stein's actions under the FAA, the district court applied a reasonable-person standard to conclude that there was no conflict of interest between Stein and Johnson. The district court further believed that Komatsu waived this argument by waiting until after the arbitration award was announced to object to Stein's alleged bias. The district court also evaluated the FAA provisions regarding fraud, procedural fairness, and the scope of the arbitrator's authority. The district court concluded that Komatsu failed to establish a violation under any of the FAA's provisions. On the same day, Komatsu appealed to this court.

Uhl and Pacific asked a motions panel of this court to dismiss Komatsu's appeal on the grounds that this court lacks jurisdiction. According to Uhl and Pacific, the arbitration agreement did not provide for review by the Sixth Circuit, and therefore, there is no jurisdiction to hear this appeal. The motions panel referred the matter to the hearing panel because "[t]he arguments raised in the motion to dismiss and the response in opposition go to the heart of the appeal." Uhl v. Komatsu...