Fort Hill Builders, Inc. v. National Grange Mut. Ins. Co.

• Decision Date: 21 March 1989
• Docket Number: No. 88-1522,88-1522
• Citation: 866 F.2d 11
• Parties: FORT HILL BUILDERS, INC., Plaintiff, Appellee, v. NATIONAL GRANGE MUTUAL INSURANCE CO., Defendant, Appellee. Carl L. Dworman, et al., Defendants, Appellants.
• Court: U.S. Court of Appeals — First Circuit

Page 11

866 F.2d 11

13 Fed.R.Serv.3d 142

FORT HILL BUILDERS, INC., Plaintiff, Appellee, v. NATIONAL GRANGE MUTUAL INSURANCE CO., Defendant, Appellee.

Carl L. Dworman, et al., Defendants, Appellants.

No. 88-1522.

United States Court of Appeals, First Circuit.

Submitted Oct. 7, 1988.

Decided Jan. 25, 1989.

Rehearing and Rehearing En Banc Denied March 21, 1989.

Carl L. Dworman and Ralph M. Dworman, on brief, pro se.

Girard R. Visconti, Mark J. Hagopian and Visconti & Petrocelli, Ltd., Providence, R.I., on brief, for defendant, appellee.

Before CAMPBELL, Chief Judge, BREYER and TORRUELLA, Circuit Judges.

PER CURIAM.

Defendants appeal from a judgment confirming an arbitration award over defendants' objections that one of the arbitrators demonstrated "evident partiality" within the meaning of 9 U.S.C. Sec. 10(b). We review the background.

A three member arbitration panel rendered a $1,124,105.00 award for plaintiff, a builder, against Dworman Associates. Defendants Carl and Ralph Dworman were the general partners of Dworman Associates. Alleging diversity jurisdiction, plaintiff brought an action seeking confirmation of the award pursuant to 9 U.S.C. Secs. 9, 13 and R.I.Gen.Laws Secs. 10-3-11, 10-3-16. Defendants counterclaimed seeking to vacate the award. Plaintiff moved for summary judgment. Defendants opposed, filing an affidavit from the attorney who had represented defendants during the arbitration proceedings. The attorney stated that "[f]rom the outset of the hearings," arbitrator Nicholson had "made it quite clear that he was not impartial." Nicholson's comments on and off the record had shown "he had very strong negative feelings about [defendants], who were the owners and developers of the project, and very strong feeling of sympathy or empathy for [plaintiff]." Nicholson had "continually" interjected with comments when witnesses were testifying, particularly if the testimony was helpful to defendants. The comments "would be critical or argumentative about the testimony." The lawyer continued as follows:

5. I do not mean to suggest in any way that Mr. Nicholson was corrupt or was conscientiously and purposefully doing something which he believed was improper. Rather, I believe that Mr. Nicholson's feelings of identification with his fellow builder, [plaintiff], became so overwhelming that he was unrestrained in advocating [plaintiff's] position to the other arbitrators throughout the proceedings.

6. Mr. Nicholson's feelings were so strong and his comments to the other arbitrators were so frequent, that it is inconceivable that the arbitrators' opinions about the case were not influenced by Mr. Nicholson. His unquestionable lack of impartiality had to have had some impact on the potential impartiality of the other arbitrators.

The Dwormans also filed affidavits stating that they had attended the arbitration proceedings and that Nicholson had been hostile from the outset. When defendants presented their case, Nicholson "adopted an air of blatant indifference, frequently closing his eyes, appearing to be asleep, and just generally ignoring the proceedings. When he did (infrequently) speak, his comments were most often direct criticisms of [defendants'] position, or indications that he had already made up his mind how he would rule, regardless of [defendants'] testimony," defendants said. Defendants did not point to any specific remarks or file a copy of the transcript of the arbitration proceedings.

In response to defendants' claims, the attorney representing a municipality at the arbitration proceedings stated that at no time during the proceedings had defendants or their attorney complained of partiality ¹ on the part of any arbitrator.

Pointing out that it was undisputed that defendants had been present at the arbitration proceedings but that there was no indication defendants had "raised or even hinted at the notion of partiality until an award was made in favor of plaintiff," a magistrate recommended that plaintiff's motion for summary judgment be granted. The district court agreed with the magistrate and added post-arbitration award, pre-judgment interest at the rate set by 28 U.S.C. Sec. 1961(a). The court also concluded that sanctions should be awarded pursuant to Fed.R.Civ.P. 56(g) and assessed $5,996.25 in attorney's fees. Fort Hill Builders, Inc. v. National Grange Mutual Insurance Company, 682 F.Supp. 145 (D.R.I.1988). Defendants have appealed contending 1) that material issues regarding partiality were presented for trial, 2) that under Rhode Island law defendants are not liable for pre-judgment interest, and 3) that attorney's fees should not have been imposed under Fed.R.Civ.P. 56(g).

1. Evident partiality.

We agree with the magistrate and district court that there was no genuine issue of material fact precluding confirmation of the award. First, as we said in Early v. Eastern Transfer, 699 F.2d 552, 588 (1st Cir.), cert. denied, 464 U.S. 824, 104 S.Ct. 93, 78 L.Ed.2d 100 (1983), absent exceptional circumstances, we will not entertain a claim of personal bias where it could have been raised at the arbitration proceedings but was not. The conduct about which defendants complain--Nicholson's alleged interruptions and interjections of comments or explanations favorable to plaintiff or hostile to defendants to the point where defendants' lawyer felt he was facing as an adversary not only plaintiff's lawyer but also arbitrator Nicholson--was the very type of conduct that defendants could have objected to at the arbitration hearings. If Nicholson's interjections were unduly disruptive of counsel's presentation or cross-examination, counsel could have pointed out the problem to him. Especially in view of counsel's opinion that Nicholson was not corrupt or purposefully behaving improperly, an objection--if warranted--well may have alleviated the problem.

Defendants argue on appeal that the extent of Nicholson's bias was not apparent until the award was actually rendered and turned out to be--defendants say--several hundred thousand dollars more than plaintiff had originally sought. Apparently defendants' point is that an arbitrator who awards more than what a party requests must be biased. Defendants did not raise this matter in their affidavits below, they only briefly averted to it in conclusory sentences in argument before the district court, and hence we will not consider it on appeal. Nor have defendants indicated whether plaintiff amended the amount sought or whether the alleged excess may be due to pre-arbitration award interest accruing over the course of the lengthy arbitration proceedings.

Second, and apart from defendants' failure to object, defendants' conclusory allegations as to Nicholson's interruptions, comments, manifestations of opinion, and "evident partiality" were insufficient to create any genuine issue of material fact. See Sidarma Societa Italiana di Armanento Spa v. Holt Marine Industries, Inc., 515 F.Supp. 1302, 1306-07 (S.D.N.Y.), aff'd., 681 F.2d 802 (2d Cir.1981) (arbitrator's consideration of the effect a decision in a particular dispute will have on the industry in general does not rise to the level of evident partiality even though it is likely that any given arbitrator's view of what is good for the industry will be colored by his personal business experience); Fairchild & Co. v. Richmond, Fredericksburg & Potomac R.R. Co., 516 F.Supp. 1305, 1313 (D.D.C.1981) (during the course of a hearing it is to be expected that an arbitrator may develop an opinion and perhaps even express it); Graphic Arts International Union, Local 97-B v. Haddon Craftsmen, Inc., 489 F.Supp. 1088, 1093-94 (M.D.Pa.1979) (evident partiality not established where, although arbitrator's conduct suggested he was unimpressed with union's case, there was no indication arbitrator prevented the presentation of evidence or arguments). Furthermore, the panel decision was unanimous for plaintiff, and defendants alleged no wrongdoing on the part of the other two members. To be sure, defendants' counsel claimed that Nicholson's comments were so strong and frequent that they must have influenced the other arbitrators. There was no contention, however, that counsel lacked an opportunity to oppose or correct Nicholson's statements or to argue his own views. That the other panel members were ultimately persuaded by Nicholson's reasoning rather than counsel's does not constitute bias.

2. Interest.

Defendants argue that state law determines whether post-award, pre-judgment interest shall be awarded in this diversity action and that Paola v. Commercial Union Assurance Companies, 461 A.2d 935 (R.I.1983) forecloses any such interest award. The district court disagreed, concluding that under either state or federal law plaintiff was entitled to interest from the date of the arbitrators' award. As to the rate at which interest should be computed, the district court reasoned that as plaintiff had invoked a federal forum, the federal rate should apply. Because the court did not regard post-award interest to be, strictly speaking, pre-judgment interest, but rather apparently saw it as closer to post-judgment interest, the court chose to apply the rate specified in 28 U.S.C. Sec. 1961(a), ² a statute providing for post-judgment interest.

Courts are not entirely in accord on the question of whether federal or state law governs entitlement to, and the rate of, post-award, pre-judgment interest. In Sunship, Inc. v. Matson Navigation Company, 785 F.2d 59 (3d Cir.1986), the Third Circuit implied that in a diversity action federal law would govern both entitlement to and the rate of post-arbitration award, pre-confirmation judgment interest. The Ninth Circuit, however, criticized Sunship in Northrop Corp. v. Triad International Marketing S.A., 842 F.2d 1154, 1155 (9th Cir.1988) and concluded that state law determined the rate of post-award, pre-judgment interest in a diversity action enforcing an arbitration...