DiRussa v. Dean Witter Reynolds Inc.

• Citation: 121 F.3d 818
• Decision Date: 05 August 1997
• Docket Number: Docket No. 96-9068.,No. 1430,1430
• Parties: Raymond J. DiRUSSA, Plaintiff-Appellant, v. DEAN WITTER REYNOLDS INC. and Lawrence J. Solari, Jr., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

121 F.3d 818

Raymond J. DiRUSSA, Plaintiff-Appellant, v. DEAN WITTER REYNOLDS INC. and Lawrence J. Solari, Jr., Defendants-Appellees.

No. 1430, Docket No. 96-9068.

United States Court of Appeals, Second Circuit.

Argued May 7, 1997.

Decided August 5, 1997.

Bruce P. McMoran, Newark, NJ (Barry & McMoran, John J. Barry, Colleen D. Shiarella, Diane Schulze, of Counsel), for Plaintiff-Appellant.

Ronald M. Green, New York City (Epstein Becker & Green, P.C., of Counsel), for Defendants-Appellees.

Before: FEINBERG, OAKES and LEVAL, Circuit Judges.

FEINBERG, Circuit Judge:

This case implicates the possible clash between two important federal policies: deference to arbitration awards in order to promote that important method of dispute resolution and enforcement of the remedial provisions of a federal statute — the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. § 621 et seq. Plaintiff Raymond J. DiRussa appeals from a judgment in the United States District Court for the Southern District of New York, Charles S. Haight, Jr., J., denying DiRussa's motion to vacate or modify an arbitration award to include an award of attorney's fees and granting a cross-motion by defendants Dean Witter Reynolds, Inc. (Dean Witter) and Lawrence J. Solari, Jr., a regional director at Dean Witter, to confirm the award. DiRussa v. Dean Witter Reynolds, Inc., 936 F.Supp. 104 (S.D.N.Y. 1996). The district court also granted defendants' motion to seal the entire file except for the court's orders and opinions. Id. at 108. For reasons stated below, we affirm.

I. Facts and Prior Proceedings

In May 1992, DiRussa was demoted by Dean Witter from the position of Branch Manager of its Ridgewood, New Jersey office to the position of Account Executive in the Morristown, New Jersey office. DiRussa was then 58 years old. DiRussa objected to the demotion and challenged it through arbitration before the National Association of Securities Dealers, Inc. (NASD), as required under the terms of his employment. DiRussa claimed that defendants had discriminated against him based on his age in violation of ADEA and the New Jersey Law Against Discrimination (NJLAD), N.J. Stat. Ann. 10:5-1 et seq.

As set forth in the arbitrators' award, defendants maintained that DiRussa was demoted because of (1) the poor performance of the Ridgewood branch compared to competitors in the same geographic area, (2) his inappropriate conduct with supervisors and subordinates, and (3) his failure to adequately explain to Solari and Robert Dwyer, Dean Witter's National Director of Sales, how he intended to increase his branch's performance. DiRussa countered that these reasons were pretextual, offering evidence that, despite his "competent and conscientious" performance as Branch Manager, he was demoted because of his age. DiRussa introduced testimony during the arbitration that, among other things, Solari and Dwyer "back-dated" a memorandum from them to DiRussa requesting information from DiRussa regarding improvement of his branch and surreptitiously placed that memorandum in DiRussa's personnel file without ever transmitting it to him.

In March 1995, after holding hearings on seven days between June and December 1994 at which both sides were represented by counsel, the arbitrators awarded DiRussa $200,000 in compensatory damages jointly and severally against both defendants and an additional $20,000 against Solari. Although the arbitrators acknowledged in the award that DiRussa also sought, among other things, punitive damages and "attorney's fees and costs of suit pursuant to the ADEA and NJLAD," the award explicitly denied all other relief.

In June 1995, DiRussa filed this complaint in the district court seeking to modify the award to include $249,050.10 in attorney's fees, and to increase the amount of damages awarded. Thereafter, defendants requested the district court to seal the entire file in the case, alleging that DiRussa's failure to file the action under seal violated a confidentiality agreement entered into by the parties during the course of the NASD arbitration. Despite DiRussa's objection that defendants' request went beyond the terms of the agreement, in an opinion dated July 7, 1995 (the July 1995 opinion) the district court placed the file under seal pending further order. The court ordered counsel for both sides to "confer with each other forthwith in a good faith effort to agree upon the documents, if any, that should be retained under seal. If counsel cannot agree, defendants have the burden of demonstrating on appropriate papers that the disputed items fall within the confidentiality agreement."

After various motions and cross-motions, the district court held, in an opinion dated July 24, 1996 (the July 1996 opinion), that there was no ground on which the arbitration award could be vacated or modified to include attorney's fees or a different damage calculation. The court also ruled that the entire file would remain under seal, with the exception of the court's orders and opinions in the case, because it was "not feasible to attempt a partial unsealing within the context of the parties' confidentiality agreement." This appeal followed. In October 1996, we granted defendants' motion to seal all documents submitted in this court that were also subject to the district court's sealing order.

II. Discussion

On appeal, DiRussa argues that the arbitration award should be modified to include attorney's fees and that the district court erred in sealing the file. In reviewing a district court's decision confirming an arbitration award, we review legal issues de novo and findings of fact for clear error. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 948, 115 S.Ct. 1920, 1926, 131 L.Ed.2d 985 (1995); International Telepassport Corp. v. USFI, Inc., 89 F.3d 82, 85 (2d Cir.1996). We have often explained that "arbitration awards are subject to very limited review in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation." Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir.1997) (internal quotes omitted). DiRussa argues that modification of the award to include attorney's fees is warranted by both Section 10 of the Federal Arbitration Act (FAA), 9 U.S.C. § 10, and several judicially-created grounds for vacating such awards. We consider each argument in turn, but ultimately hold that the district court did not err in confirming the award.

A. Manifest Disregard of the Law

DiRussa argues that the award should be modified because the arbitrators engaged in "manifest disregard of the law" by failing to award attorney's fees under the ADEA and NJLAD. Although we have often recognized this judicially-created ground for modifying or vacating an arbitration award, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 933 (2d Cir.1986) (citing Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187-88, 98 L.Ed. 168 (1953)); Carte Blanche (Singapore) Pte., Ltd. v. Carte Blanche Int'l, Ltd., 888 F.2d 260, 265 (2d Cir.1989), we have also emphasized that the reach of the manifest disregard doctrine is "severely limited." Government of India v. Cargill Inc., 867 F.2d 130, 133 (2d Cir. 1989). Indeed, we have cautioned that manifest disregard "clearly means more than error or misunderstanding with respect to the law." Bobker, 808 F.2d at 933.

The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator. Moreover, the term "disregard" implies that the arbitrator appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it.

Id. Thus, to modify or vacate an award on this ground, a court must find both that (1) the "arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether," and (2) the "law ignored by the arbitrators ... was `well defined, explicit, and clearly applicable'" to the case. Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 112 (2d Cir.1993) (internal citations omitted); Bobker, 808 F.2d at 933-34.

As an initial matter, DiRussa argues that the manifest disregard standard, which gives extreme deference to arbitrators, should not apply in cases where arbitrators construe federal statutes rather than decide simply the usual issues in typical commercial or labor disputes. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 23, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991) (holding for the first time that ADEA claims are subject to compulsory arbitration). In support of this argument, DiRussa cites Cole v. Burns Int'l Sec. Servs., 105 F.3d 1465 (D.C.Cir.1997) (upholding order compelling arbitration of Title VII claim), in which the D.C. Circuit expressed its view that

the nearly unlimited deference paid to arbitration awards in the context of collective bargaining is not required, and not appropriate, in the context of employees' statutory claims because in this context, the Supreme Court has assumed that arbitration awards are subject to judicial review sufficiently rigorous to ensure compliance with statutory law.

Id. at 1468-69; cf. Chisolm v. Kidder, Peabody Asset Management, Inc., 966 F.Supp. 218, 223-28 (S.D.N.Y.1997) (discussing but rejecting argument that a "different manifest disregard standard" should apply to statutory claims). DiRussa similarly contends that a federal court has an "obligation to ensure that statutory rights ... are protected in the arbitral forum" and to vacate an award when arbitrators engage in an "obvious abuse of power" by denying a remedy required by statute.

Defendants counter that DiRussa waived this argument by not raising it in the district court. They point out that the sole issue raised in DiRussa's complaint was whether the arbitrators "acted in manifest disregard of the law in...