Freeman v. Pittsburgh Glass Works, LLC

• Decision Date: 06 March 2013
• Docket Number: No. 12–2026.,12–2026.
• Citation: 709 F.3d 240
• Parties: James D. FREEMAN, Appellant v. PITTSBURGH GLASS WORKS, LLC; PGW Auto Glass, LLC.
• Court: U.S. Court of Appeals — Third Circuit

709 F.3d 240

James D. FREEMAN, Appellant

v.PITTSBURGH GLASS WORKS, LLC; PGW Auto Glass, LLC.

No. 12–2026.

United States Court of Appeals,Third Circuit.

Argued Jan. 16, 2013.

Opinion Filed: March 6, 2013.

Bruce C. Fox [ARGUED], Obermayer, Rebmann, Maxwell & Hippel, Pittsburgh, PA, for Appellant.

David S. Becker, Jeffrey J. Mayer [ARGUED], Freeborn & Peters, Chicago, IL, Robert B. Cottington, Cohen & Grigsby, Pittsburgh, PA, for Appellees.

Before: SMITH, CHAGARES, and BARRY, Circuit Judges.

OPINION

SMITH, Circuit Judge.

James Freeman recently lost an arbitration dispute. Soon thereafter, he discovered that the arbitrator had received contributions for a judicial campaign from PPG Industries, the defendants' minority owner. Freeman filed a motion to vacate the arbitration award, but he conveniently failed to mention that the law firm representing him had contributed a far greater amount to the same campaign. The District Court denied the motion, and we will affirm.

I

Freeman was a director of operations at PPG Auto Glass until his firing in 2008. At the time of Freeman's firing, PPG Auto Glass was a division of PPG Industries. Since then, PGW Auto Glass and Pittsburgh Glass Works—collectively known as PGW—have assumed PPG Auto Glass's liabilities. Significantly, PPG Industries maintains a 40–percent interest in PGW.

After losing his job, Freeman sued PGW in the District Court for the Western District of Pennsylvania. Freeman was sixty years old at the time of his firing, and he brought a claim under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. The case was assigned to U.S. District Judge Arthur Schwab. At the close of discovery, Judge Schwab held a settlement conference at which the parties entered a binding arbitration agreement. The court directed the clerk to mark the case closed. See Supp.App. 11 (“[T]his case shall be marked CLOSED.”).¹

As part of the agreement, both sides listed three potential arbitrators, and Maureen Lally–Green appeared at the top of both lists. Lally–Green is an experienced jurist who served as a judge on the Pennsylvania Superior Court for over a decade. Two years before her retirement in 2009, she made an unsuccessful bid for a seat on the Pennsylvania Supreme Court. She now works in private practice and teaches at Duquesne University School of Law.

On August 22, 2011, the parties spoke with Lally–Green for the first time. She reminded them, “you all know that it's a small legal community here,” and she acknowledged that she “knew some people at PPG [Industries],” the minority owner of PGW. App. 5e to 5f. She also told the parties that she taught a seminar on labor law. According to PGW, she explained that she taught the seminar with Joseph Mack, PPG Industries' senior employment attorney. See Supp.App. 65; App. 8c. But Freeman maintains that she did not mention Mack or reveal anything else about her relationship with PPG Industries. See App. 7a to 7b. Undeterred, the parties proceeded with Lally–Green as their arbitrator.

Lally–Green conducted a hearing near the end of 2011. Each side had a day to present evidence. By all accounts, the proceeding was fair and thorough—neither party raises any issue concerning the arbitration hearing itself. One month later, Lally–Green issued a lengthy opinion that rejected Freeman's discrimination claim. She concluded that Freeman lost his job because he “had limited recent sales experience ... [and] received average performance ratings in a poorly performing region.” Supp.App. 54.

Three months later, Freeman filed a motion in the District Court to vacate Lally–Green's arbitration decision. Whether born of sour grapes or a desire for justice, this motion claimed that Lally–Green had failed to disclose campaign contributions that she had received from PPG Industries and its employees during her Supreme Court bid. These contributions totaled $4,500. ² To put this in perspective, Lally–Green raised over $1.7 million during her unsuccessful campaign. See Supp.App. 85. The motion also claimed that Lally–Green had failed to disclose her teaching relationship with Mack. In light of these nondisclosures, Freeman urged the District Court to vacate the arbitration. He argued that Lally–Green was evidently partial in violation of 9 U.S.C. § 10(a)(2) and that she had fraudulently induced the arbitration agreement.³

Freeman's motion omitted an important fact. As PGW soon pointed out, Lally–Green had received more than five times as much money—roughly $26,000—from the law firm that represented Freeman during the arbitration.⁴ This firm continues to represent Freeman on appeal. To prove Lally–Green's impartiality, PGW cited the two-sided nature of the contributions as well her equanimity during the proceedings. PGW also argued that the District Court lacked jurisdiction to consider the motion because it had closed the original case.

The District Court saw “no reason why the [ ] challenge [could] not occur in the same case as the original proceeding.” App. 3g n.1. As for Freeman's partiality and fraud claims, the court concluded that Lally–Green's nondisclosures were immaterial and insubstantial. The court thus denied Freeman's motion, and Freeman filed a timely notice of appeal.

Freeman now maintains that Lally–Green was evidently partial and that she fraudulently induced the arbitration agreement. For its part, PGW denies these allegations and raises two threshold arguments—namely, that the District Court lacked jurisdiction to consider Freeman's motion and that Freeman waived his partiality objection. We turn to these arguments.

II

We must first decide whether the District Court had jurisdiction to consider Freeman's motion to vacate. The court indisputably had federal-question jurisdiction to consider his initial complaint. 28 U.S.C. § 1331. But in PGW's view, the court lost jurisdiction once it closed the case and sent the parties to arbitration. If so, the court would need a separate jurisdictional basis to consider Freeman's motion to vacate.⁵ Absent a separate basis, the court lacked jurisdiction and we must remand for dismissal. See Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1050 (3d Cir.1993). The problem with this argument is that it relies on a faulty premise. As will soon be clear, the District Court never lost jurisdiction because it administratively closed the case.

Federal courts have long distinguished dismissals from administrative closings. The two procedures have different practical and jurisdictional effects. The Supreme Court discussed the effects of a dismissal in Green Tree Financial Corp. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000). There, the district court had dismissed the plaintiff's claims with prejudice after referring the parties to arbitration. The Supreme Court considered whether that dismissal was an appealable final order under the Federal Arbitration Act. It noted that the “order plainly disposed of the entire case on the merits and left no part of it pending before the court.” Id. at 86, 121 S.Ct. 513. It then stated that the Federal Arbitration Act “permit[s] parties to arbitration agreements to bring a separate proceeding in a district court to enter judgment on an arbitration award once it is made (or to vacate or modify it).” Id.

Our cases have extended the Supreme Court's analysis. Two years after Green Tree, we held that any order that dismisses a case for arbitration is final—even when the district court dismisses the case without prejudice. See Blair v. Scott Specialty Gases, 283 F.3d 595, 602 (3d Cir.2002). We noted that “[t]he Green Tree decision draws a distinction between dismissals and stays, but does not draw any distinctions within the universe of dismissals.”Id.; see Morton Int'l v. A.E. Staley Mfg., 460 F.3d 470, 477–78 (3d Cir.2006). As a result, anyone who wishes to challenge an arbitration after a dismissal must bring a separate action. See Green Tree, 531 U.S. at 86, 121 S.Ct. 513.

By contrast, administrative closings are not final orders. See WRS, Inc. v. Plaza Entm't, 402 F.3d 424, 429 (3d Cir.2005). We first discussed administrative closings in Penn West Associates v. Cohen, 371 F.3d 118 (3d Cir.2004). In that case, the parties had reached a tentative settlement agreement. The district court then ordered the clerk to mark the case “closed.” Id. at 121. We concluded that the district court had administratively closed the case. For that reason, the court should have reopened the case after the agreement fell apart.

District courts often use administrative closings to prune their overgrown dockets. Id. at 128. The practical effect is “to remove a case from the court's active docket and permit the transfer of records associated with the case to an appropriate storage repository.” Lehman v. Revolution Portfolio L.L.C., 166 F.3d 389, 392 (1st Cir.1999). Administrative closings are particularly useful “in circumstances in which a case, though not dead, is likely to remain moribund for an appreciable period of time.” Id.

Most importantly, administrative closings have no effect on the district court's jurisdiction. Penn West, 371 F.3d at 128. As the First Circuit explained, “[a]dministrative closings comprise a familiar, albeit essentially ad hoc, way in which courts remove cases from their active files without making any final adjudication.” Lehman, 166 F.3d at 392. This means that a court may reopen a closed case—either on its own or at the request of either party—even if it lacks an independent jurisdictional basis for doing so. See Fla. Ass'n for Retarded Citizens, Inc. v. Bush, 246 F.3d 1296, 1298 (11th Cir.2001) (“Designating a case ‘closed’ does not prevent the court from reactivating a case either of its own accord or at the request of the parties.”). There is substantial unanimity on this issue. See Dees v. Billy, 394 F.3d 1290, 1294 (9th Cir.2005) (“[T]hose circuits that have confronted the issue have unanimously [agreed] ... that an...