Cat Charter Llc v. Schurtenberger

• Decision Date: 13 July 2011
• Docket Number: No. 10–11674.,10–11674.
• Parties: CAT CHARTER, LLC, Patricia Ryan, Daniel Ryan, Plaintiffs–Appellants,v.Walter SCHURTENBERGER, Multihull Technologies, Inc. (MTI), a Florida corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

646 F.3d 836

23 Fla. L. Weekly Fed. C 106

CAT CHARTER, LLC, Patricia Ryan, Daniel Ryan, Plaintiffs–Appellants,

v.Walter SCHURTENBERGER, Multihull Technologies, Inc. (MTI), a Florida corporation, Defendants–Appellees.

No. 10–11674.

United States Court of Appeals, Eleventh Circuit.

July 13, 2011.

Jeffrey B. Crockett, Coffey Burlington, PC, Miami, FL, David Bohonnon, Bohonnon Law Firm, LLC, New Haven, CT, for Plaintiffs–Appellants.Michael English Stearns, Douglas James Roberts, Leiby Stearns & Roberts, PA, Sunrise, FL, Francis “Chip” Muldoon, Key West, FL, for Defendants–Appellees.Appeal from the United States District Court for the Southern District of Florida.Before TJOFLAT and BARKETT, Circuit Judges, and STEELE,^*District Judge.

TJOFLAT, Circuit Judge:

The Federal Arbitration Act (the “FAA” or the “Act”), 9 U.S.C. § 1 et seq., provides for expedited and limited judicial review of arbitration awards, id. §§ 9–11. Section 10(a) of the Act delineates four grounds that permit a court to vacate an award. The question here is whether arbitrators “exceeded their powers”—thereby justifying vacatur of their award under § 10(a)(4)—when they purportedly failed to provide a “reasoned award” as agreed to by the parties. The district court held that they had and therefore vacated the award. We respectfully disagree and reverse.

I.

This case arises out of a dispute over the construction of a yacht. Daniel and Patricia Ryan are Massachusetts citizens who, in anticipation of retirement and with an eye toward the construction of a vessel, formed a Delaware limited liability corporation, Cat Charter, LLC (“Cat Charter”). The Ryans, through Cat Charter (collectively, the “Plaintiffs”), agreed to pay Multihull Technologies, Inc. (“MTI”), a Florida business owned solely by Walter Schurtenberger (collectively, the “Defendants”), to construct a vessel to be known as the Magic.¹

But relations between the parties soured, and the Defendants never delivered the Magic, despite receiving roughly $2 million from the Plaintiffs. As a result, the parties entered into binding arbitration pursuant to their written agreement.²

The Plaintiffs filed their initial Statement of Claim with the American Arbitration Association (the “AAA”) on October 23, 2008. On April 15, 2009, the Plaintiffs submitted an Amended Statement of Claim,³ in which they asserted six separate claims against the Defendants: (1) deceptive and unfair trade practices under Fla. Stat. § 501.201 et seq. ; (2) rescission; (3) breach of contract; (4) fraud or alternative misrepresentation; (5) breach of fiduciary duty; and (6) civil remedy for criminal practices under Florida law.

The Defendants answered on April 30, 2009, denying the Plaintiffs' claims and arguing that the construction of the Magic had proceeded according to the terms of the “cost plus” contract entered into in 2005.⁴ Both the Plaintiffs and the Defendants requested an award of reasonable attorney's fees.

The arbitration proceeded under the Commercial Arbitration Rules of the AAA (the “Arbitration Rules”) before a panel of three arbitrators (the “Panel”). ⁵ Pursuant to the Arbitration Rules, the Panel held a preliminary hearing on March 4, 2009. The next day it issued a Report of Preliminary Hearing and Scheduling Order setting forth the schedule and procedures for the pending arbitration. In relevant part, the Panel stated, “The form of the award also will be determined by agreement of the parties.”⁶ On March 25, 2009, the Defendants' attorney sent a facsimile to the AAA case manager informing her that “the parties have agreed that the panel shall provide a reasoned award and that the panel shall determine who the prevailing party or parties are on the various claims between the parties.” The Plaintiffs also reminded the Panel of this agreement in their post-trial brief, stating that “[t]he parties have agreed to ask the panel to issue a ‘reasoned award’ and determine which party is the ‘prevailing party’ on all claims.”

Following discovery, a five-day hearing, and post-trial briefing, the Panel issued a unanimous arbitration award (the “Award”) on December 7, 2009. The Award stated, in pertinent part:

1. On the claim of the Claimants, CAT CHARTER, LLC; DANIEL RYAN; and PATRICIA RYAN (hereinafter collectively “Claimants”), for violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), we find that Claimants have proven their claim against Respondents, MULTIHULL TECHNOLOGIES, INC. (hereinafter “MTI”), and WALTER SCHURTENBERGER (“SCHURTENBERGER”), by the greater weight of the evidence;

2. On the claim of the Claimant, CAT CHARTER, LLC, for breach of contract by Respondent MTI, we find that Claimant, CAT CHARTER, LLC has proven its claim against MTI by the greater weight of the evidence;

3. All other claims of the Claimants are hereby denied. All counter-claims of the Respondents, MTI and SCHURTENBERGER, are denied;

4. On the claim of the Claimants for entitlement to attorney's fees in this arbitration proceeding and entitlement to an award of arbitration expenses and costs, inclusive of the arbitrators' fees and costs, we find that Claimants are the substantially prevailing parties in this arbitration and are entitled to an award of such fees and costs against the Respondents, MTI and SCHURTENBERGER.

5. On the claim of the Respondents for entitlement to attorney's fees and costs in this arbitration, we find that Respondents are not the substantially prevailing parties in this arbitration, and said claim is denied;

6. On the claim by Claimants for civil theft which the Arbitrators have denied, the Arbitrators find that Claimants raised a claim that had substantial fact and legal support pursuant to Fla. Stat. § 772.104(3). More specifically, we find that the issues relating to missing resin and the cost of the skiff presented substantial fact issues raised by Claimants, justifying denial of any attorney's fees for Respondents; ....

The Panel then ordered the Defendants to “jointly and severally pay” the Plaintiffs more than $2 million in damages, fees, costs, and interest. The Panel also granted the Plaintiffs a first lien on the Magic.

On December 31, 2009, the Plaintiffs filed a motion to confirm the Award in the District Court for the Southern District of Florida.⁷ The Plaintiffs attached to this motion the Award, their Amended Statement of Claim to the Panel, and a host of other exhibits. They made no mention of the agreement requiring the Panel to provide a reasoned award, and they presented no argument regarding the sufficiency of the reasons provided.

The Defendants responded on January 19, 2009, with a motion to vacate the Award on the ground that the Panel exceeded its authority by failing to issue a reasoned award as required by the parties' agreement. The Defendants never complained to the Panel regarding the form of the Award or requested a modification of the Award after it was delivered; they first raised their concern over the lack of reasons provided by the Panel in their motion to vacate.⁸

The district court vacated the arbitration award, agreeing with the Defendants that the Panel had exceeded its powers within the meaning of § 10(a)(4) by failing to provide a satisfactorily reasoned award. Cat Charter LLC v. Schurtenberger, 691 F.Supp.2d 1339, 1344–45 (S.D.Fla.2010). The court further ruled that remand to the Panel was barred by the operation of the common law doctrine functus officio.⁹ Id. at 1345. If this court were to affirm the district court's order, the parties would be required to begin a new arbitration proceeding before a new panel in order to settle the controversy surrounding the Magic. In other words, the district court determined that the Award was so deficient that it warranted sending the parties back to square one, ostensibly granting the Defendants a second bite at the apple because of a perceived technical defect in the form of the Award.

II.

A.

We review the district court's findings of fact for clear error and its conclusions of law de novo. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 947–48, 115 S.Ct. 1920, 1926, 131 L.Ed.2d 985 (1995) (holding that a circuit court reviewing a district court's disposition of an arbitration award should apply “ordinary, not special, standards.”).

As the district court recognized, the FAA “ ‘imposes a heavy presumption in favor of confirming arbitration awards' ”; therefore, “ ‘a court's confirmation of an arbitration award is usually routine or summary.’ ” Cat Charter LLC v. Schurtenberger, 691 F.Supp.2d 1339, 1342 (S.D.Fla.2010) (quoting Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1288 (11th Cir.2002)). But § 10(a) of the FAA provides for vacatur of an arbitration award in four scenarios, one of which is relevant to this case. ¹⁰ A district court may ¹¹ vacate the Award if, by not providing a reasoned award, “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” 9 U.S.C. § 10(a)(4).¹² Still, this review is circumscribed, as arbitrators “do not act as junior varsity trial courts where subsequent appellate review is readily available to the losing party.” Nat'l Wrecking Co. v. Int'l Bd. of Teamsters, Local 731, 990 F.2d 957, 960 (7th Cir.1993).

As the Act makes clear, arbitration is a creature of contract. Parties must agree to arbitrate in the first instance, and may contractually limit or alter the issues to be presented to the arbitrators, the scope of the award, and, as here, the form of the award. The FAA “requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.” Volt Info. Scis., Inc. v. Bd. of Trustees, 489 U.S. 468, 478, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989). Ultimately, arbitrators derive their powers from the parties' agreement.

We recognize, then, that arbitrators may exceed their power within the...