Bull HN Info. Sys. Inc. v. Hutson

• Citation: 229 F.3d 321
• Decision Date: 08 September 2000
• Docket Number: No. 00-1190,00-1190
• Parties: (1st Cir. 2000) BULL HN INFORMATION SYSTEMS, INC. PLAINTIFF, APPELLEE, v. CHARLES J. HUTSON DEFENDANT, APPELLANT. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 321

229 F.3d 321 (1st Cir. 2000)

BULL HN INFORMATION SYSTEMS, INC. PLAINTIFF, APPELLEE, v. CHARLES J. HUTSON DEFENDANT, APPELLANT.

No. 00-1190

United States Court of Appeals For the First Circuit

Heard September 8, 2000

Decided October 6, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Robert B. Collings, U.S. Magistrate Judge] [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Michael J. Liston, with whom Carr & Liston was on brief, for appellant.

David B. Chaffin, with whom Kathleen A. Kelley and Hare & Chaffin were on brief, for appellee.

Before Torruella, Chief Judge, Boudin and Lynch, Circuit Judges.

Lynch, Circuit Judge.

Arbitration sometimes fails to fulfill its promise of efficient, inexpensive dispute resolution. Charles J. Hutson, believing his employer, Bull HN Information Systems, owed him commissions and had underpaid certain benefits, sought to arbitrate the dispute as required under the terms of his contract. After winning two rounds of arbitration but twice losing in district court review of the awards, Hutson appeals the court order vacating the latest arbitration award in his favor for unpaid commissions. That award results from the first stage of an arbitration; benefits-related claims are to be arbitrated later. Specifically, in the first phase of the arbitration, the arbitrator determined that Hutson's request for arbitration was timely and that he was, indeed, entitled to payment of the commission he sought.

A magistrate judge of the district court, applying the Federal Arbitration Act, 9 U.S.C. § 1 et seq., held on round one that the arbitrator exceeded his authority and so vacated and remanded the finding that Hutson's request for arbitration was timely. Following the court's remand, the arbitrator again concluded that Hutson's request was timely; the court vacated the modified award and remanded the entire case to a new arbitrator. Hutson has not yet arbitrated his benefits-related claims, some of which turn on the timeliness of his demand.

Hutson argues that the district court improperly vacated the arbitrator's finding of timeliness, along with his commissions award. We agree. Because the district court went beyond the applicable "exceedingly deferential" standard of review when it overturned the arbitration award, we reverse the order and direct entry of judgment confirming the arbitral award for Hutson on the issues of the timeliness of his demand and the compensation due, and remand for arbitration of Hutson's benefits-related claims.

Hutson's appeal also gives rise to a question of first impression in this circuit of whether the FAA's provisions allowing appeal from certain orders concerning arbitration cover an order vacating and remanding a partial award. Permitting appeal in this case would not offend the strong federal policies favoring arbitration and disfavoring piecemeal litigation, and we conclude that appellate jurisdiction exists.

I.

Hutson began working as a sales representative for Bull in 1989. Bull's 1990 Sales Compensation Plan included Section VI, entitled "Interpretation and Dispute Resolution," which, in turn, contained sections with different headings. Section VI.D, entitled "Arbitration of Certain Disputes," required covered employees to submit to arbitration "[a]ll disputes which involve claims for $3,000 or more, and which arise out of the participant's course of employment or out of the termination thereof." That section also provided that "[t]he Commercial Arbitration Rules of the American Arbitration Association shall apply to all aspects of the arbitration between the parties." The Plan did not list the applicable AAA rules or otherwise make them available to participants. A different section, VI.E, entitled "Controlling Law", included a choice of law provision, which provided that the Plan would be "governed in all respects by" Massachusetts law. A separate section, Section VI.F, entitled "Limitations of Actions," required claimants to demand arbitration of disputes arising out of the Plan within two years after the claim arose. The basic dispute between the parties is whether this aggregation of sections required that notice of demand for arbitration be filed with the AAA, as AAA rules state, or simply sent to the employer.

In 1991, while Hutson was hospitalized following a liver transplant, his wife twice sent letters to Bull on his behalf, once by certified mail, asserting that Hutson was due commissions for work on an account in 1990 and requesting arbitration of the dispute in accordance with the provisions of the Plan. The letters read, in relevant part:

Under the terms of the Sales Compensation Plan we are to ask for arbitration within two years of the occurrence. The non-payment of this matter came to our attention in mid-October 1990. This letter and the attached statement is Chuck's official request for this arbitration and his explanation of why this commission is due. Please forward this request to the appropriate arbitration committee under the terms of the Plan....

... A speedy response to this matter would be appreciated.

Bull did not respond.¹ These letters demanded arbitration within the two-year period.

Hutson eventually elected deferred disability retirement from Bull, effective February, 1994. In 1995, Hutson served a formal Demand for Arbitration on Bull seeking recalculation of his benefits base and repayment of certain benefits, as well as the 1990 commission claim. The demand was filed at the regional AAA office. Bull did not dispute the matter going to arbitration but defended that Hutson's claims were barred because he failed to follow the procedures required for a formal arbitration demand within the Plan's two-year filing period as to the 1991 letters. It said the 1995 Demand was simply too late.

Arbitral Proceedings

When the parties proceeded to arbitration in 1995, by stipulation the arbitrator divided the case into two phases. In Phase 1, the arbitrator was to determine: 1) whether Hutson's claim was barred for failing to file a claim for arbitration under the Plan's two-year limitation provision; and 2) if Hutson was not barred, whether any compensation and/or commission was due on the 1990 sale.² After a two-day hearing including testimony from several witnesses, the arbitrator ruled that the Plan's two-year limitations period did not bind Hutson because the Plan was "not a contract" and that "the parties are deemed to have submitted this matter to arbitration under Rule 7 of the AAA Commercial Arbitration Rules." The arbitrator apparently misread the language of the Plan which specified that Bull employees were at-will employees and that the Plan did not create a contract for employment for a specific period. That language, of course, could not mean that there was no contract to pay compensation owed or to send such disputes to arbitration. The arbitrator also determined that Hutson, "by his wife, twice filed a timely demand for arbitration to which [Bull] failed to respond. [Hutson], therefore, has met any statute of limitation applicable in this matter." On the merits of Hutson's commissions claim, the arbitrator found that Hutson was entitled to $52,605.57 plus 10% interest from January 1, 1991.

On Bull's petition, the magistrate judge vacated the arbitrator's Phase 1 Award, ruling that the arbitrator had exceeded his authority by invalidating the Plan's limitations period. See Bull HN Information Systems, Inc. v. Hutson, 983 F. Supp. 284, 292 (D. Mass. 1997). The court remanded the case to the arbitrator for determination of the timeliness issue according to the Plan's two-year provision. The magistrate judge, in his initial opinion, asserted that the arbitrator never considered whether there was a timely demand in light of his "no contract" ruling. Because there was no appeal from that initial opinion, we do not consider whether that conclusion was correct. The magistrate judge then went on, in dicta,³ to define the issue on remand as whether there had been a "timely, i.e., within two years provided by the contract, demand for arbitration as defined in Rule 6." Id. (emphasis added). The magistrate thus inappropriately assumed the answer to an issue of contract interpretation which was properly committed to the arbitrator. The arbitrator's response must be understood in this context.

In the second arbitration proceeding, the arbitrator again refused to enforce the Plan's limitations clause, this time because he found that the Plan was an "archetypal contract of adhesion." The arbitrator also found that Hutson had "by his wife, twice filed demands for arbitration to which [Bull] failed to respond" and concluded that "[t]he demand for arbitration was, therefore, made in a timely manner under all of the circumstances of this matter."

Hutson sought to confirm the award. Bull once again sought, in the original action, to vacate the arbitrator's decision. Its application to vacate the "Modified Phase 1 Award" was dismissed for lack of jurisdiction. The court said it had entered final judgment in the previous action vacating the first Phase 1 Award and had not retained jurisdiction. Bull instituted a new action requesting that the court vacate the award. Once again, the magistrate judge ruled that the arbitrator exceeded his authority and manifestly disregarded the law. The court also ruled that remand to a new arbitrator was warranted because the arbitrator "has yet again chosen to create his 'own notions of industrial justice' rather than follow the terms of the agreement and the governing law."

Hutson thereafter moved twice for clarification of the court's order, seeking determination of whether the entire award was vacated or whether certain claims survived. The court clarified that its order vacated the entire Modified Phase 1 Award and that the new arbitrator was to decide not only those issues determined in the Modified Phase 1...