Checkrite of San Jose, Inc. v. Checkrite, Ltd., 85-K-454.

Decision Date04 August 1986
Docket NumberNo. 85-K-454.,85-K-454.
Citation640 F. Supp. 234
PartiesCHECKRITE OF SAN JOSE, INC., Petitioner, v. CHECKRITE, LTD., et al., Respondents.
CourtU.S. District Court — District of Colorado

George T. Ashen, Denver, Colo., for petitioner.

Frederick T. Berhenke, William G. Imig, Marion A. Brewer, Ireland, Stapleton, Pryor & Pascoe, P.C., Denver, Colo., for respondents.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

This is an action by respondent, Checkrite, Ltd., to reopen this case and vacate the award of the arbitrators, pursuant to 9 U.S.C. § 10(c) and (d).1 The case arose out of a dispute between a franchisee, petitioner, Checkrite of San Jose, Inc., and a franchisor, respondents. The franchise operation was located in San Jose, California and was created, pursuant to the franchise agreement between the parties, in July, 1983. Initially, the case was filed in the Superior Court of the State of California, in and for the County of Santa Clara, then the case was moved to a federal court in California, and finally it was transferred to this court. I entered a court order on April 5, 1985 staying the action, pending arbitration proceedings. An arbitration hearing before the American Arbitration Association was commenced on September 24, 1985. The arbitrators issued an award dated December 3, 1985, which the parties received December 10, 1985. The award rescinded the franchise agreement and awarded petitioner $110,000.00.

On March 10, 1986 respondents filed this motion. Respondents allege that the case should be reopened and the award vacated because: 1) the arbitrators failed to postpone an arbitration hearing on September 24, 1985; 2) the arbitrators refused to hear evidence which was material to the controversy; and 3) the arbitrators exceeded their powers by having a manifest disregard of the applicable law. Petitioner responds to each of these allegations and further alleges that the motion should be dismissed, because it is untimely, and also claims attorney fees from respondents for filing a frivolous and vexatious claim in reviewing the award.

Judicial review of an award following properly conducted arbitration proceedings is extremely narrow, and an arbitrator's award will not be set aside unless it fails to "draw its essence from the collective bargaining agreement." United Steelworkers of America v. American Manufacturing Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers of America v. Enterprise Wheel and Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). Once an arbitration award is entered, the finality of arbitration weighs heavily in its favor and cannot be upset except under exceptional circumstances. Fizer v. Safeway Stores, Inc., 586 F.2d 182 (10th Cir.1978). Parties who agreed to submit matters to arbitration are "presumed to agree that everything, both as to law and fact, necessary to render an ultimate decision, is included in the authority of the arbitrator." Continental Materials Corp. v. Gaddis Mining Co., 306 F.2d 952 (10th Cir.1962). Courts are expected to and justified in exercising caution when asked to vacate an arbitration award, which is the product of the theoretically informal, speedy and inexpensive process of arbitration, freely chosen by the parties. Ormsbee Development Co. v. Grace, 668 F.2d 1140, 1147 (10th Cir.), cert. denied, 459 U.S. 838, 103 S.Ct. 84, 74 L.Ed.2d 79 (1982). Further when a party attacks the validity of such an award, the party has the burden of sustaining such an attack. Id. The policy behind upholding final arbitration awards is the settlement of disputes amicably and quickly without extensive judicial intervention; speed and inexpensiveness are essential qualities of the arbitration process. In order to preserve these qualities and thereby retain the effectiveness of the arbitral system, it is essential that the federal courts recognize that the arbitrator is in the best position to make decisions relating to and affecting the parties to the arbitration, and to defer to the arbitrators judgment, absent abuse of his power. United Steelworkers of America v. Ideal Cement Co., 762 F.2d 837, 840-41 (10th Cir.1985). With these principles in mind, I will now turn to the parties arguments.

Respondents allege grounds for vacation of the award pursuant to 9 U.S.C. § 10(c), in that the arbitrator erred in denying their request for a postponement of the arbitration hearing and excluded the testimony of a witness. Federal courts are to give great deference to an arbitrators' decision on matters of procedure which arise from the dispute and bear on its final disposition. Basically, matters of procedure lie within the discretion of the arbitrators. United Steelworkers, 762 F.2d at 841; John Wiley and Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964). Further, arbitrators are given great latitude in conducting an arbitration hearing. Such proceedings are not constrained by formal rules of procedure or evidence. Hoteles Condado Beach, LA Concha and Convention Center v. Union De Tronquistas Local 901, 763 F.2d 34 (1st Cir.1985), citing F. Elkouri and E. Elkouri, How Arbitration Works 254-56 (3d ed. 1973). Although an arbitration award can be vacated where the arbitrators refuse to postpone a hearing upon sufficient cause and when prejudice results to the parties, the party seeking vacation must show "sufficient cause" existed and the rights of the parties have been prejudiced. 9 U.S.C. § 10(c).

Originally, this case was scheduled for a hearing on June 18, 1985. Following a request by the respondents, and later agreement of the parties, the hearing was continued and then reset to September 25, 1985. At the time of the hearing, respondents again requested a postponement or continuance, which was considered and then denied. The respondents state that they requested the second postponement or continuance in order to review complex financial records which were to be provided by petitioner. Petitioner responds that most of the materials were filed over four months before the hearing, and that the last documents were copies of the petitioner's gross receipts and were supplied at least two weeks before the arbitration proceeding. These final documents were only relevant for the purpose of computing the eight per cent royalty fees, which respondents had claimed were due them at the arbitration hearing. Respondents have not demonstrated that there was sufficient cause to postpone the hearing, or that their rights have been prejudiced by the failure of the arbitrators to postpone the hearing. The arbitrators were not guilty of misconduct by failing to postpone the hearing.

Respondents also allege that the arbitrators erred in failing to allow John Bahneman to testify concerning certain issues. "The arbitrator is the judge of the admissibility and relevancy of evidence submitted in an arbitration proceeding." Hoteles, 763 F.2d at 39, quoting M. Hill and A. Sinicropi, Evidence in Arbitration 22 (1980). Without a showing of exceptional circumstances a reviewing court may not vacate an award based on the arbitrator's determination of the relevancy or persuasiveness of the evidence submitted by the parties. Id. at 39-40. Even if the arbitrator failed to receive some relevant evidence, every failure does not constitute misconduct requiring vacation of an arbitrator's award. Id. at 40.

Bahneman was the owner and operator of a Checkrite franchise in Sacramento, California. The arbitrators allowed Bahneman to testify extensively, however they did not permit him to testify...

To continue reading

Request your trial
9 cases
  • Pinnacle Group, Inc. v. Shrader
    • United States
    • North Carolina Court of Appeals
    • January 21, 1992
    ...viewed as a whole. See Atlantic Shores Resort Joint Adventure v. Martin, 731 F.Supp. 1279 (D.S.C.1990); Checkrite of San Jose, Inc. v. Checkrite, Ltd., 640 F.Supp. 234 (D.Colo.1986). Thus, as a general rule an arbitration award is presumed valid and the party seeking to vacate it must shoul......
  • Cellular Radio Corp. v. OKI AMERICA
    • United States
    • D.C. Court of Appeals
    • September 8, 1995
    ...The arbitrator is the judge of the relevancy of evidence. AAA Commercial Arbitration Rule 31; see also Checkrite of San Jose v. Checkrite, Ltd., 640 F.Supp. 234, 237 (D.Colo.1986) (holding that evidentiary ruling will not be reviewed without a showing of exceptional circumstances). The pane......
  • Byerly v. Kirkpatrick Pettis Smith Polian, 98CA2487.
    • United States
    • Colorado Court of Appeals
    • January 20, 2000
    ...a non-statutory basis for setting aside an arbitration award if it is arbitrary and capricious); Checkrite of San Jose, Inc. v. Checkrite, Ltd., 640 F.Supp. 234, 237 (D.Colo.1986) (court may set aside arbitration award only "if the arbitrator operated in manifest disregard of the law"). We ......
  • Union Ins. Co. v. Hottenstein
    • United States
    • Colorado Court of Appeals
    • December 4, 2003
    ...not subject to review by the courts. Foust v. Aetna Cas. & Ins. Co., 786 P.2d 450 (Colo.App.1989); see Checkrite of San Jose, Inc. v. Checkrite, Ltd., 640 F.Supp. 234 (D.Colo.1986). The arbitrator is the final judge of all questions of law and fact. Judd Constr. Co. v. Evans Joint Venture, ......
  • Request a trial to view additional results
2 books & journal articles
  • Chapter 17 - § 17.4 • GROUNDS FOR VACATING THE AWARD
    • United States
    • Colorado Bar Association Colorado and Federal Arbitration Law and Practice (CBA) Chapter 17 Post-award Proceedings Before Arbitrator and District Court: Modification/Correction/Vacation of the Award
    • Invalid date
    ...McGinity v. Pawtucket Mut. Ins. Co., 899 A.2d 504 (R.I. 2006).[193] Id. at 507.[194] Checkrite of San Jose, Inc. v. Checkrite, Ltd., 640 F. Supp. 234 (D. Colo. 1986).[195] Laws v. Morgan Stanley Dean Witter, 452 F.3d 398 (5th Cir. 2006).[196] Carson v. PaineWebber, Inc., 62 P.3d 996 (Colo. ......
  • Chapter 18 - § 18.4 • THE PROCEDURE FOR CONFIRMATION AND JUDGMENT
    • United States
    • Colorado Bar Association Colorado and Federal Arbitration Law and Practice (CBA) Chapter 18 The Arbitration Award: Confirmation, Judgment, Fees, and Interest
    • Invalid date
    ...962 (10th Cir. 1987).[39] Judd Constr., 642 P.2d at 922.[40] Osborn, 117 P.3d at 81.[41] Checkrite of San Jose, Inc. v. Checkrite, Ltd., 640 F. Supp. 234 (D. Colo. 1986).[42] Sanders-Midwest, Inc. v. Midwest Pipe Fabricators, Inc., 857 F.2d 1235 (8th Cir. 1988).[43] Wallace v. Buttar, 378 F......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT