Decker v. Merrill Lynch

• Citation: 205 F.3d 906
• Decision Date: 02 February 2000
• Docket Number: PLAINTIFF-APPELLANT,Nos. 98-1658,DEFENDANT-APPELLEE,99-1558,s. 98-1658
• Parties: (6th Cir. 2000) EMILY DECKER,, v. MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC., Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 906

205 F.3d 906 (6th Cir. 2000)

EMILY DECKER, PLAINTIFF-APPELLANT, v. MERRILL LYNCH, PIERCE, FENNER AND SMITH, INC., DEFENDANT-APPELLEE.

Nos. 98-1658, 99-1558

U.S. Court of Appeals, Sixth Circuit

Argued: February 2, 2000

Decided and Filed: March 06, 2000

Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 98-71347--Julian A. Cook, Jr., District Judge.

Joseph H. Spiegel (argued and briefed), Southfield, MI, for Plaintiff-Appellant.

Thomas R. Cox (argued and briefed), Clarence L. Pozza, Jr. (briefed), Miller, Canfield, Paddock & Stone, Detroit, MI, for Defendant-Appellee.

Before: Merritt and Moore, Circuit Judges; Bell,^* District Judge.

OPINION

Karen Nelson Moore, Circuit Judge.

This appeal is a consolidation of two related appeals before this court involving the same parties and the same underlying dispute. Emily Decker and Merrill Lynch engaged in a National Association of Securities Dealers ("NASD") arbitration hearing to resolve a dispute regarding Merrill Lynch's management of Decker's securities investment. After receiving an arbitration award, Decker filed a lawsuit against Merrill Lynch claiming that Merrill Lynch improperly interfered with the arbitration when one of its wholly owned subsidiaries hired the chairperson of the arbitration panel to act as a closing agent for various real estate transactions. In her suit, Decker seeks damages based on tortious interference with contract, breach of contract, and other grounds. Merrill Lynch filed a motion to dismiss for failure to state a claim and to confirm the arbitration award, while Decker filed a motion for summary judgment on her claims. The district court denied Decker's motion for summary judgment and granted Merrill Lynch's motion to dismiss holding in part that Decker's claims constitute an impermissible collateral attack on the arbitration award in violation of the Federal Arbitration Act ("FAA"). Decker appeals the district court's decision. As this appeal was pending, Decker filed a second statement of claim for arbitration with NASD that was identical to the complaint she filed in court. Merrill Lynch responded by filing a motion with the district court requesting the court to enforce its judgment granting Merrill Lynch's motion to dismiss and to enjoin Decker from proceeding with her new arbitration claim. The district court granted Merrill Lynch's motion and enjoined Decker from arbitrating her second claim, which judgment Decker also appeals. We AFFIRM the district court's grant of Merrill Lynch's motion to dismiss because Decker's claims collaterally attack the arbitration award and the FAA provides the exclusive remedy for challenging acts that taint an arbitration award. We also AFFIRM the district court's injunction barring Decker from proceeding with her second NASD arbitration claim because this claim also operates as an impermissible collateral attack on the arbitration award in violation of the FAA.

I. FACTS AND PROCEDURE

Decker and Merrill Lynch entered into a Uniform Submission Agreement to resolve through NASD Arbitration a dispute over Merrill Lynch's handling of Decker's securities investment. After nine days of hearing sessions, the chairperson of the three-person arbitration panel transmitted a letter to the parties disclosing that his law office had been hired by Lender's Service, Inc., a wholly owned subsidiary of Merrill Lynch, to act as a closing agent for several real estate transactions in his geographic area. He stated that because such transactions are unrelated to Merrill Lynch's securities business, he did not believe that this client relationship would affect his impartiality. In response, Decker filed with the arbitration panel a motion for sanctions against Merrill Lynch for interfering with the arbitration process and for depriving her of a fair hearing. She also asked the chairperson to step down due to this conflict of interest. The entire arbitration panel met in executive session and decided to deny Decker's motion for sanctions and request for recusal. The arbitration concluded on November 12, 1997, and Decker was awarded damages in the amount of $40,000 on December 9, 1997.

On March 5, 1998, Decker filed a complaint against Merrill Lynch in Michigan state court claiming that Merrill Lynch owed Decker a duty not to interfere with the arbitration process by directly or indirectly hiring the chairperson of the arbitration panel during the course of the arbitration, conduct it should have known would harm her. Decker does not seek vacatur of the arbitration award under the FAA in this suit, but instead asserts various common law tort and contract claims. Merrill Lynch removed the case to federal court based on diversity jurisdiction. It then moved, under Federal Rule of Civil Procedure 12(b)(6), to dismiss all of Decker's claims against it for failure to state a claim upon which relief may be granted and to confirm the arbitration award. Decker filed a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(c), asserting no genuine issue of material fact exists regarding Merrill Lynch's liability. The district court confirmed the arbitration award and granted Merrill Lynch's motion to dismiss because it concluded that Decker's complaint constitutes a collateral attack on the arbitration award in violation of the FAA, which provides the exclusive remedy to challenge an arbitration award. The district court also held that these issues had already been decided by the arbitration panel in response to Decker's motion for sanctions and thus were precluded from relitigation. Decker appeals the district court's judgment granting Merrill Lynch's motion to dismiss and denying her motion for summary judgment.

After filing her appeal with this court, Decker filed a second statement of claim for arbitration with NASD, asserting the same allegations as in her complaint. In response, Merrill Lynch filed a motion with the district court to enforce its judgment granting Merrill Lynch's motion to dismiss and to enjoin Decker from proceeding with this second arbitration claim. The district court granted Merrill Lynch's motion, holding that Decker is precluded from relitigating in arbitration the court's determination that her claims are a collateral attack on the arbitration award and also holding that Decker has waived her right to arbitrate these claims by first substantially invoking the judicial process. Decker filed a timely notice of appeal of the district court's order. This appeal has been consolidated with Decker's appeal of the district court's judgment granting Merrill Lynch's motion to dismiss.

In sum, Decker now asks this court to reverse the district court's grant of Merrill Lynch's motion to dismiss, reverse the district court's denial of her motion for summary judgment regarding Merrill Lynch's liability, and remand for a determination of damages. In the alternative, Decker requests that we reverse the district court's grant of Merrill Lynch's motion to enjoin arbitration and allow Decker to pursue her second NASD claim.

II. ANALYSIS

A. Dismissal of Decker's Complaint

We review de novo a dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. See Merriweather v. City of Memphis, 107 F.3d 396, 398 (6th Cir. 1997). "The claim should not be dismissed unless it appears beyond doubt that plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988) (quoting Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir. 1983), cert. denied, 469 U.S. 826 (1984)).

The FAA states, "[a] written provision in... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Once an arbitration is conducted under a valid arbitration contract, the FAA "provides the exclusive remedy for challenging acts that taint an arbitration award." Corey v. New York Stock Exch., 691 F.2d 1205, 1211 (6th Cir. 1982). A party may file a petition to vacate an arbitration award where (1) "the award was procured by corruption, fraud, or undue means"; (2) "there was evident partiality or corruption in the arbitrators, or either of them"; (3) "the arbitrators were guilty of... misbehavior by which the rights of any party have been prejudiced"; or (4) "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). In addition, a party may petition a federal court to modify or correct an award "[w]here there was an evident material miscalculation of figures or an evident material mistake" in description; "[w]here the arbitrators have awarded upon a matter not submitted to them"; or "[w]here the award is imperfect in matter of form not affecting the merits of the controversy." 9 U.S.C. § 11(a)-(c). An arbitrator's award will be binding on the parties unless they challenge the validity of the underlying contract to arbitrate under § 2 of the FAA or seek to vacate, modify, or correct the award under §§ 10 or 11. See Corey, 691 F.2d at 1212.

In this case, Decker does not challenge the validity of her contract to arbitrate with Merrill Lynch. Nor does she seek to vacate, modify, or correct the arbitration award. Instead, Decker makes several claims under contract and tort law that she argues constitute an independent action. In her first count, she alleges that Merrill Lynch's hiring of the chairperson of the arbitration panel constitutes tortious interference with their contract to have a fair and impartial arbitration of their dispute. Second,...