Bernstein Seawell & Kove v. Bosarge
| Decision Date | 07 April 1987 |
| Docket Number | No. 86-2036,86-2036 |
| Parties | BERNSTEIN SEAWELL & KOVE, Plaintiff-Appellee, v. W.E. BOSARGE, Jr., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Jerry L. Schutza, Axelrod, Smith, Komiss & Kirshbaum, Houston, Tex., for defendant-appellant.
Thomas J. Hannsz, Pasadena, Tex., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before CLARK, Chief Judge, REAVLEY and WILLIAMS, Circuit Judges.
W.E. Bosarge, Jr. is appealing the order of the United States District Court for the Southern District of Texas confirming and reducing to judgment an arbitration award which requires Bosarge to repurchase certain shares in a limited partnership of which he was once the general partner. Bosarge claims that the arbitration award is unenforceable for a variety of reasons. Because we find a lack of merit in any of Bosarge's contentions, we affirm the decision of the district court.
Hugoton I, Ltd., a Texas limited partnership, was formed in 1979 to develop an oil and gas well. Appellant Bosarge was the general partner, and appellee Bernstein Seawell & Kove (BS & K) was one of Hugoton's twenty-three limited partners. In 1980, Bosarge incorporated a new public company known as Texas General Group, Inc. (Texas General). In connection with the initial public offering of Texas General's common stock, Bosarge claims to have resigned as general partner of Hugoton and to have transferred his general partnership interest to Texas General, but no notice of this alleged resignation and transfer was given to any of the limited partners. While BS & K corresponded with Texas General from time to time about matters of interest to the partnership, it claimed that this correspondence was based on the understanding that Texas General was an agent of Bosarge.
The limited partnership agreement contained a provision obligating the general partner, at the option of any of the limited partners, to repurchase a portion of the limited partnership interest. The purchase price of each partnership unit was to be determined through the use of a specific formula contained in the agreement. The number of units to be repurchased in each year would vary with the market value of the units. In any given year, the total repurchase price could be anywhere from zero up to a contractual cap of $55,020. The general partner's obligation to repurchase the limited partnership units terminated upon the dissolution of the partnership.
In 1983, BS & K decided to exercise its option to have the general partner repurchase its share of the limited partnership. A dispute arose among the parties concerning the interpretation of the repurchase provision of the limited partnership agreement. BS & K notified the other limited partners of the problem, and they authorized BS & K to proceed on their behalf. In April 1983, appellee began arbitration proceedings as provided for in the agreement. A notice to arbitrate was sent to "W.E. Bosarge, Jr., Hugoton I. Ltd., 350 South Post Oak Road, Suite 200, Houston, Texas." Bosarge claims never to have received this notice.
BS & K chose an arbitrator in accordance with the agreement. After Bosarge failed to respond to the notice to arbitrate, BS & K requested Chief Judge Singleton of the United States District Court for the Southern District of Texas to select an arbitrator. A third arbitrator was then selected by the two arbitrators already chosen. The arbitration panel convened in October 1983, but Bosarge failed to make an appearance at the hearing. After evaluating the evidence presented by BS & K, the panel found in favor of the twenty-three limited partners. The arbitration award required appellant to repurchase the maximum number of partnership units for the year 1982 and to prepare calculations and to repurchase units in accordance with those calculations for the year 1983. Bosarge made no effort to comply with the terms of the award.
On March 7, 1984, BS & K filed suit in the United States District Court pursuant to the provisions of the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq., asking for a judgment confirming the arbitration award. The case was tried to the court in December 1985. At that time, the district court granted BS & K's oral request for a trial amendment to include the other twenty-two limited partners, clarifying the fact that BS & K was bringing the action on behalf of all the limited partners. On January 7, 1986, the district court entered a final judgment in favor of the limited partners. Bosarge filed a timely notice of appeal.
Appellant's first contention is that the arbitration award is unenforceable because he was not informed of the arbitration proceeding until after the hearing had been held, and the arbitrators had reached a final decision. The district court, however, determined that "actual notice of the arbitration proceeding was given to all parties in accordance with the partnership agreement." Such a finding of fact may be reversed only if it is clearly erroneous. Wiley v. Offshore Painting Contractors, Inc., 711 F.2d 602, 610 (5th Cir.1983). Because there is sufficient evidence to support the conclusion that Bosarge received actual or constructive notice of the arbitration hearing, we affirm the finding of the district court. While "[a]ll parties in an arbitration proceeding are entitled to notice and an opportunity to be heard," Totem Marine Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649, 651 (5th Cir.1979), due process is not violated if the hearing proceeds in the absence of one of the parties when that party's absence is the result of his decision not to attend. International Association of Heat and Frost Insulators and Asbestos Workers v. General Pipe Covering, Inc., 613 F.Supp. 858, 860 (D.Minn.1985).
Appellant contends that the evidence clearly established that the arbitration notice was not mailed in accordance with the partnership agreement. 1 While BS & K acknowledges that it failed to review the address records of the general partner before sending the notice in April, 1983, it stated that it relied upon a letter from Bosarge, dated November 29, 1982, which listed the Hugoton office address, where the notice was sent, as the one at which he could be reached. The district court was justified, therefore, in finding that BS & K had given Bosarge actual notice of the arbitration proceedings.
Even if Bosarge never received the actual notice sent by BS & K there is sufficient evidence to support the finding that Bosarge had constructive notice of the arbitration proceedings prior to their commencement. William E. Sutton, an attorney for BS & K, testified that one of the arbitrators had notified Bosarge of the time and place of the hearing, and the district court was entitled to believe that testimony. Sutton also recalled a telephone conversation with attorney Robert Axelrod, during which Axelrod stated that he would be representing Bosarge in arbitration proceeding. Sutton testified that this discussion with Axelrod occurred prior to the hearing and that Axelrod was advised in writing of the date of the proceedings.
Alexrod's testimony did not refute his representation of Bosarge, even though he stated that he was representing Texas General at the time of the arbitration proceeding. Axelrod also stated that he did not recall any specific conversations or correspondence with Sutton, but he had no reason to doubt the veracity of Sutton's account. Once Axelrod's knowledge of the arbitration proceedings was established, that knowledge could properly be implied to Bosarge, since a client "is considered to have 'notice of all facts, notice of which can be charged upon the attorney.' " Cooper v. Lewis, 644 F.2d 1077, 1082 (5th Cir.1981) (quoting Link v. Wabash Railroad, 370 U.S. 626, 634, 82 S.Ct. 1386, 1390, 8 L.Ed.2d 734 (1962)).
Appellant's next contention is that, assuming arguendo the arbitration panel had the authority to hear the dispute, the district court erred in finding that "Bernstein, Seawell & Kove filed the instant action on behalf of itself as a limited partner, and as a representative of the twenty-two other [limited partners] named in the original complaint...." Appellant claims the evidence clearly establishes that BS & K was acting solely in its own interest and that the award may be confirmed only to the extent of BS & K's share of the partnership. We determine, however, that the district court's finding is not clearly erroneous.
The caption of the original complaint filed in the district court by BS & K reads: "IN THE MATTER OF THE ARBITRATION BETWEEN BERNSTEIN SEAWELL & KOVE, Petitioners...." Bosarge claims that, even if BS & K intended to act in a representative capacity, it failed to include the names of all the parties in accordance with Fed.R.Civ.P. 10(a), 2 thereby waiving its capacity to bring suit on behalf of any party other than itself. The complaint, however, expressly requested the court "for an order confirming the award of Arbitrators In the Matter of the Arbitration between Bernstein Seawell & Kove, et al, Petitioners and W.E. Bosarge, Jr., Respondent...." Additionally, the copy of the arbitration award attached to the complaint listed the twenty-three limited partners. This list was prefaced by the following statement:
Bosarge claims he did not know that BS & K was purporting to represent anyone other than itself until the issue was raised at trial. The evidence, however, belies the accuracy of this assertion. The caption of appellant's "MOTION TO DISMISS AND ORIGINAL ANSWER OF RESPONDENT W.E. BOSARGE JR." clearly refers to "IN THE MATTER OF THE ARBITRATION BETWEEN BERNSTEIN SEAWELL & KOVE, ET AL, Petitioners." This caption shows that...
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