Florasynth, Inc. v. Pickholz

• Decision Date: 06 December 1984
• Docket Number: D,No. 120,120
• Citation: 750 F.2d 171
• Parties: FLORASYNTH, INC., Plaintiff-Appellee, v. Alfred PICKHOLZ, Defendant-Appellant. ocket 84-7333.
• Court: U.S. Court of Appeals — Second Circuit

Page 171

750 F.2d 171

FLORASYNTH, INC., Plaintiff-Appellee, v. Alfred PICKHOLZ, Defendant-Appellant.

No. 120, Docket 84-7333.

United States Court of Appeals, Second Circuit.

Argued Sept. 17, 1984.

Decided Dec. 6, 1984.

Francis Carling, New York City (Francis Carling, Leo T. Crowley, Winthrop, Stimson, Putnam & Roberts, New York City, of counsel), for defendant-appellant.

Lloyd I. Isler, New York City, for plaintiff-appellee.

Before VAN GRAAFEILAND and CARDAMONE, Circuit Judges and MacMAHON, District Judge. ^*

CARDAMONE, Circuit Judge:

On this appeal we consider whether a party aggrieved by an award at the conclusion of an arbitration proceeding must raise his defenses to it within the period prescribed, or whether he may sit that time out and make his motion to vacate as a defense to his opponent's motion to confirm. The United States District Court, 598 F.Supp. 17, for the Southern District of New York (Edelstein, J.) held that the Federal Arbitration Act's three month statute of limitations for motions to vacate, 9 U.S.C. Sec. 12 (1982), barred appellant Alfred Pickholz' attempt to interpose such a motion as a defense to a motion made by appellee, Florasynth, Inc., to confirm its favorable arbitration award. Fully recognizing that New York permits such a defensive motion after the time for making it has elapsed and that a contrary view will create "one rule for Athens and another rule for Rome," we nonetheless affirm. When a losing party has important defenses to an arbitration award he should raise them promptly instead of later attempting to oppose what should be a routine confirmation motion.

I

Pickholz was a Vice-President of Florasynth pursuant to an employment contract dated November 2, 1979. On December 1, 1981 Florasynth gave him six months notice of termination under the "no cause" termination provision of the contract. A dispute arose about whether, according to the contract, Florasynth owed Pickholz certain commissions. The employment contract provided for arbitration of disputes before a tripartite arbitration panel. Pickholz demanded arbitration and chose his arbitrator. Florasynth agreed to arbitrate and chose its arbitrator. These two selected a third person as the neutral arbitrator.

Following Pickholz' presentation of his claim to the panel, but prior to any determination on its merits, Florasynth challenged the qualifications of the arbitrator chosen by Pickholz. The other two arbitrators investigated the challenges to that arbitrator's qualifications and decided that any determination on such issue would be time-consuming, extraneous to the merits of the claim before them, and probably beyond their powers. Accordingly, they wrote a letter dated September 8, 1982 stating that they had "a duty to resign and dissolve the panel" so that the parties would be free to conduct another proceeding de novo, with a new panel that would not be concerned with this question. Pickholz' attorney then initiated a de novo proceeding by naming a different arbitrator. Florasynth did the same and the two chose a third arbitrator. The second panel found in Florasynth's favor two to one--with Pickholz' choice dissenting--and rendered its award on April 14, 1983. Four months later on August 9, 1983 Florasynth successfully moved to confirm the award.

Appellant now claims that he is not bound by this final arbitration award for several reasons. He argues that only a court may entertain challenges to the qualifications of an arbitrator, and that the court may hear those challenges only upon its review of the challenged panel's final award. In effect, appellant argues that the first panel of arbitrators had no right to resign, and it was their duty to decide the dispute before them. Appellant further contends that because two members of the original panel of arbitrators improperly resigned and dissolved the panel, the second panel never had jurisdiction to resolve the contract dispute, and for that reason its award must be vacated.

Pickholz remained silent for four months after the panel of arbitrators found against him. He made no attempt to correct what he apparently believed was an injustice by moving to vacate the final arbitration award within the three month time period allotted for such a motion under the Federal Arbitration Act, 9 U.S.C. Sec. 12. Not until Florasynth moved to confirm the award did appellant object. We agree with the district court judge that this was too late.

II

As a threshold matter we address appellant's contention that the members of the first panel of arbitrators had no right to resign and, therefore, the second panel never obtained jurisdiction and could not legally render an award. Although the panel in question was made up of two arbitrators appointed by the parties and one "neutral" arbitrator, there is no question that all three members of the panel have a responsibility to be disinterested. Section 5 of the Federal Arbitration Act provides that when an arbitration panel comprises two partisan arbitrators who select a third, neutral umpire, the three persons appointed must act as a board of arbitrators. 9 U.S.C. Sec. 5. The language of the arbitration clause sued upon shows that such was the intent in this case. That clause stated that Pickholz or the Company could demand arbitration and "shall each select one (1) arbitrator.... The said arbitrators so selected shall ... name a third arbitrator, and together the three (3) persons so named shall constitute the arbitrators to make the determination." Here, two were not to act merely as partisan advocates directing argument to a third who would act as umpire. The inference from the clause is quite the contrary; the three arbitrators were intended to serve and act as one board.

A party may vacate an arbitration award when "there was evident partiality or corruption in the arbitrators, or either of them." 9 U.S.C. Sec. 10(b). "Evident partiality" means more than a mere appearance of bias. See International Produce v. A/S Rosshavet, 638 F.2d 548, 552 (2d Cir.), cert. denied, 451 U.S. 1017, 101 S.Ct. 3006, 69 L.Ed.2d 389 (1981). As arbitrators are usually knowledgeable individuals in a given field, often they have interests and relationships that overlap with the matter they are considering as arbitrators. The mere appearance of bias that might disqualify a judge will not disqualify an arbitrator. See id.; but see Morelite Construction Corp. v. Carpenters Benefit Funds, 748 F.2d 79 (2d Cir.1984) (father-son relationship between an arbitrator and an officer of one party to the arbitration constitutes "evident partiality").

Nonetheless, an arbitrator must disqualify himself when he believes he is partial. There are certainly circumstances under which, although a party could not successfully mount a charge of evident partiality against an arbitrator the arbitrator may wish to resign. That decision is better left to the discretion of the individual arbitrator. Cf. Wolfson v. Palmieri, 396 F.2d 121, 125 (2d Cir.1968). Because arbitrators act in a quasi-judicial capacity, they, like judges, have an unqualified right to recuse themselves from any matter that they, in their sole discretion, believe might cause their impartiality to be questioned. If, as is the case here, the arbitrators believed that their resignation under the circumstances would best serve the interests of the parties, it was both their right and their responsibility to resign. Id.

At oral argument appellant disclosed that he would ultimately request a remand of this dispute to the first panel of arbitrators. In effect, appellant would seek an order directing the two resigning arbitrators to hear a case from which they had recused themselves. The Arbitration Act does not provide for judicial scrutiny of an arbitrator's qualifications to serve, other than in a proceeding to confirm or vacate an award, which necessarily occurs after the arbitrator has rendered his service. There is, therefore, no basis, statutory or otherwise, for a court to review an arbitrator's earlier resignation, and we know of no authority that grants courts the power to force unwilling arbitrators to serve. We conclude that the resignation of the first panel of arbitrators was not improper and that the second panel obtained jurisdiction over the matter.

III

Turning to the statute of limitations issue, appellant cites our decision in The Hartbridge, 57 F.2d 672 (2d Cir.1932), cert. denied sub nom., Munson Steamship Line v. North England Steamship Co., 288 U.S. 601, 53 S.Ct. 320, 77 L.Ed. 977 (1933), as support for his argument that the statute of limitations in 9 U.S.C. Sec. 12 does not apply to defenses that may be raised against a motion to confirm. While some courts have relied on The Hartbridge to support this conclusion, see, e.g., Riko Enterprises, Inc. v. Seattle Supersonics Corp., 357 F.Supp. 521 (S.D.N.Y.1973); Paul Allison, Inc. v. Minikin Storage of Omaha, Inc., 452 F.Supp. 573 (D.Neb.1978); Moran v. Paine, Webber, Jackson & Curtis, 279 F.Supp. 573 (W.D.Pa.1966), aff'd, 389 F.2d 242 (3d Cir.1968), it stands for no such proposition. The Hartbridge is not authority for permitting a motion to vacate to be interposed upon the making of a motion to confirm when the three month period has elapsed. In that case the arbitrator rendered the award on November 6, 1931. On December 1, less than a month later, the winning party in the arbitration filed a motion to confirm. The losing party argued that the court lacked jurisdiction to entertain the motion to confirm because it had three months to move to vacate and fully intended to move within that time. The district court granted the confirmation order believing that the losing party could make its motion to vacate later.

On appeal, we disagreed with the district court and held that one party's motion to confirm an arbitration award imposes on the other party an obligation to move to vacate if he intends to do so. 57 F.2d at 673. Thus,...