Booth v. Hume Pub., Inc.

• Decision Date: 05 June 1990
• Docket Number: No. 89-8320,89-8320
• Citation: 902 F.2d 925
• Parties: Alan A. BOOTH, Plaintiff-Appellee, Counter-Defendant, v. HUME PUBLISHING, INC., and The Hume Group, Inc., Defendants-Appellants, Counter-Claimants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 925

902 F.2d 925

16 Fed.R.Serv.3d 888

Alan A. BOOTH, Plaintiff-Appellee, Counter-Defendant, v. HUME PUBLISHING, INC., and The Hume Group, Inc. Defendants-Appellants, Counter-Claimants.

No. 89-8320.

United States Court of Appeals Eleventh Circuit.

June 5, 1990.

Robert H. Hishon, Jonathan D. Moonves, and Jesse S. Burbage, Hishon & Ranney, Atlanta, Ga., for defendants-counterclaimants-appellants.

J. Douglas Stewart and Nolie J. Motes, Stewart, Melvin and House, Gainesville, Ga., for plaintiff-counterdefendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before VANCE ^* and ANDERSON, Circuit Judges, and LYNNE ^**, Senior District Judge.

ANDERSON, Circuit Judge:

Appellants, Hume Publishing, Inc. and The Hume Group, Inc. (hereinafter referred to jointly as "Hume"), appeal the district court's order confirming an arbitration award in favor of appellee Alan Booth. The district court applied the provisions of the Federal Arbitration Act (the "Act") in determining whether to confirm the award, and accordingly struck appellant's counterclaims and defenses as impermissible under the Act. Finding that less than one year had passed since the date of the arbitration award and that no timely motion to vacate or modify the award had been filed, the district court concluded that the Act required enforcement of the award. For the reasons discussed below, we affirm the judgment of the district court.

BACKGROUND

On July 1, 1982, Hume entered into a written employment agreement with appellee Alan Booth. The agreement contained an arbitration provision whereby either party could require that any dispute arising between the parties as to the interpretation or application of their employment agreement would be submitted to arbitration. The agreement stated that such arbitration would be final and binding upon the parties. The employment agreement also contained a choice of law provision stating that it would be "subject to and construed in accordance with the laws of the State of Georgia."

Booth's employment with Hume ended in 1986, and a dispute arose as to certain bonus benefits claimed to have been earned by Booth. Pursuant to the employment agreement, Hume filed a Demand for Arbitration against Booth. Arbitration was conducted and the arbitrator issued a written award in favor of Booth.

Seven months later, Booth, having received no satisfaction from Hume, filed a petition in federal district court pursuant to Sec. 9 of the Federal Arbitration Act, 9 U.S.C. Sec. 9 (1970), to confirm and enter judgment on the arbitration award. Hume answered, asserting that Georgia arbitration law, not the Federal Arbitration Act, applied to this case. Hume contended that even if the Act applied, the district court lacked authority under the Act to enter judgment on the award because the parties did not agree to judicial confirmation of the award. In addition, Hume set forth certain defenses to the confirmation of the award.

Hume also asserted counterclaims against Booth, for which it sought damages and injunctive relief. The counterclaims alleged breach of the employment agreement, breach of fiduciary duty, fraud, intentional interference with contractual relations, breach of duty of due diligence, and misappropriation of confidential information. All of these claims were premised upon the employment contract that was the subject of the arbitration award. These claims were not raised in the arbitration proceedings.

Booth moved to dismiss the counterclaim, to strike portions of the defendant's answer, and for an immediate judgment. The district court granted Booth's motions and entered judgment confirming the arbitration award.

Regarding Hume's counterclaim, the court held that under the Federal Arbitration Act a counterclaim other than one for vacation or modification of the award could not be filed in response to a motion for confirmation of an arbitration award. The district court interpreted Secs. 10 and 11 of the Act (setting forth the grounds for vacating, modifying, and correcting an award) to permit a party to plead only certain specific defenses to a motion for confirmation. The court further found that Hume's counterclaim initiated a claim separate and distinct from the arbitration award and was not encompassed within the limited and specific defenses permitted under Secs. 10 and 11 of the Act. Accordingly, the district court dismissed the counterclaim.

Similarly, regarding Hume's various defenses to the award, the district court held that the portions of the answer that did not constitute a motion for vacation or modification of the award under Secs. 10 and 11 of the Act were not permitted. In addition, the court held that the portions of the answer that could be construed as a motion for modification or vacation of the award were time-barred by the Act's three month time limit for filing such motions.

On appeal Hume argues that (1) Georgia law applies to this case, and therefore the district court should not have dismissed Hume's defenses as barred by the Federal Arbitration Act; (2) even if the Act does apply, the district court did not have authority under the Act to confirm the award because the parties did not agree to entry of judgment by the court; and (3) under the Federal Arbitration Act, counterclaims may properly be filed in response to a petition to confirm an arbitration award. ¹

DISCUSSION

A. Application of the Federal Arbitration Act

Hume argues that the district court erred in applying the provisions of the Federal Arbitration Act to this case because the employment agreement provided that it should be construed in accordance with Georgia arbitration law. Hume points out that the United States Supreme Court, in Volt Information Sciences v. Board of Trustees of the Leland Stanford Junior Univ., 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989), determined that the parties to an arbitration agreement may contract to apply the arbitration laws of a particular jurisdiction. In Volt the Supreme Court held that the Act does not preempt state arbitration laws that are not in conflict with the goals and policies of the Act, and that the Act does not prevent enforcement of a private agreement to arbitrate under different rules than those set forth in the Act itself. Id. at ---, 109 S.Ct. at 1254-55.

Hume contends, under the authority of Volt, that the Act does not preempt Georgia arbitration law and that therefore the choice of law provision in the employment agreement should control. However, Hume failed to present this argument to the district court. All of the parties in the court below assumed that the Act would preempt state arbitration law if the agreement involved interstate commerce and thus fell within the coverage of the Act. ²

Although as a general rule an appellate court will not consider a legal issue or theory raised for the first time on appeal, Lattimore v. Oman Const., 868 F.2d 437, 439 (11th Cir.1989), we have discretion to do so if the new issue or theory "involves a pure question of law, and if refusal to consider it would result in a miscarriage of justice," id. (quoting United States v. Southern Fabricating Company, 764 F.2d 780, 781 (11th Cir.1985)).

In this case, we are not persuaded that rejection of Hume's attempt to raise the preemption issue would result in a miscarriage of justice. It is true that the Supreme Court's recent decision in Volt creates new law that was not available to Hume when it argued its case in the court below. However, construing the arbitration agreement in accordance with the law of Georgia at the time the contract was negotiated, we are not convinced that the parties to this contract intended that Georgia's common law of arbitration would apply to disputes arising between them.

The arbitration provision at issue in this case is an "all issues" arbitration provision of the type disfavored by the Georgia common law of arbitration. See, e.g., Merrill Lynch, Pierce, Fenner & Smith v. Wilbanks, 162 Ga.App. 154, 290 S.E.2d 122 (1982). Such a clause would be enforceable under the Federal Arbitration Act but not under Georgia common law. Id. ³ At the time Booth and Hume executed their employment agreement, the Georgia courts took the position that the Federal Arbitration Act preempted the state's substantive arbitration law, at least where state law would render the arbitration agreement void. See, e.g., West Point-Pepperell v. Multi-line Indus., 231 Ga. 329, 330-31, 201 S.E.2d 452, 453-54 (1973) (holding that "[w]here such a transaction involves commerce, within the meaning of the Federal Arbitration Statute, the state law and policy with respect thereto must yield to the paramount federal law."). Therefore, when Hume and Booth agreed that their employment contract would be subject to Georgia law, they probably intended that the federal arbitration law would apply rather than the Georgia common law.

Volt gives effect to the contractual agreement of the parties to apply the law of a particular jurisdiction. Here, the choice of law provision in the agreement is not clear. Under these circumstances, we conclude that there is no miscarriage of justice involved in our declining to address Hume's Volt preemption argument made for the first time on appeal. Accordingly, we apply the Federal Arbitration Act on this appeal.

B. Hume's Defenses

Hume asserted several defenses to the petition for confirmation: that the award was founded on a mistake of law, that the award evidenced a lack of consideration of the proper evidence, and that the award demonstrated a manifest disregard of the law. Hume asserted before the district court, and contends on appeal, that these defenses were proper under the state law of arbitration and therefore should be allowed. Hume did not argue below, nor does he assert on appeal, that the defenses are proper even if the Federal Arbitration Act applies.

We have already noted that we...