Garrity v. McCaskey, 14493

• Citation: 612 A.2d 742,223 Conn. 1
• Decision Date: 21 July 1992
• Docket Number: No. 14493,14493
• Court: Supreme Court of Connecticut
• Parties: Doris B. GARRITY v. Douglas G. McCASKEY.

Page 742

612 A.2d 742

223 Conn. 1

Doris B. GARRITY v. Douglas G. McCASKEY.

No. 14493.

Supreme Court of Connecticut.

Argued June 9, 1992.

Decided July 21, 1992.

Alexander J. Trembicki, Westport, for appellant (defendant).

A. Reynolds Gordon, Bridgeport, for appellee (plaintiff).

Before PETERS, C.J., and CALLAHAN, COVELLO, BORDEN and BERDON, JJ.

PETERS, Chief Justice.

The principal issue in this appeal is whether a court should vacate an award resulting from consensual arbitration because of the arbitrators' alleged manifest disregard of the applicable law. The arbitration arose out of a written agreement of the parties subsequent to an action commenced by the plaintiff, Doris B. Garrity, in which she claimed that the defendant, Douglas G. McCaskey, had violated state and federal securities laws in his management of her stock portfolio. Following the arbitrators' decision and award of damages in favor of the plaintiff, the plaintiff filed an application with the Superior Court pursuant to General Statutes § 52-417 ¹ to confirm the award and the defendant filed a separate application pursuant to General Statutes § 52-418 ² to vacate the award. The trial court granted the plaintiff's application for confirmation. Thereafter, the defendant appealed to the Appellate Court from the judgment confirming the award. ³ We transferred the appeal to this court pursuant to Practice Book § 4023 and General Statutes § 51-199(c), and now affirm.

The arbitrators found the following facts. In 1984, the plaintiff commenced a business relationship with the defendant, in which the defendant undertook to manage the plaintiff's stock portfolio. From the outset, the defendant ignored the plaintiff's instructions that prohibited particular transactions, and engaged in margin, option, and other highly speculative trading. Due to continued losses in these unauthorized trades, the defendant also sold portions of the plaintiff's original portfolio to cover the account debt. These transactions significantly decreased the size and value of the total portfolio. Although the defendant claimed that the applicable statutes of limitations had expired since the beginning of his alleged misconduct, the arbitrators found that "the existence of [a] fiduciary relationship [between the plaintiff and the defendant] tolled the Statute of Limitations so that [the plaintiff's] claim is timely." ⁴ The arbitrators rendered their decision in favor of the plaintiff and awarded damages in the amount of $330,306, which included restoration of the original portfolio's value as of March 7, 1991, the date of the hearing.

The defendant makes two principal claims in support of his contention that the trial court should have vacated the arbitration award. He maintains that the arbitration award was in manifest disregard of the law because it failed to recognize that applicable state and federal statutes of limitations on their face barred the plaintiff's claim and that these statutes had not been tolled. He maintains, further, that the arbitration award exceeded the scope of the arbitration submission, and was in manifest disregard of the law, when the panel awarded damages to the plaintiff that restored the value of her portfolio as of 1991, the time of the hearing. We are unpersuaded.

I

We address first the defendant's claim that the arbitrators should have barred the plaintiff's securities claims because of applicable state and federal statutes of limitations that were not tolled in the circumstances of this case. This claim raises two subissues: (1) as a general proposition, does a "manifest disregard of the law" require a trial court to vacate an arbitration award; and (2) if so, should the arbitration award in the present case be vacated on this ground?

A

Our inquiry into "manifest disregard of the law" as a ground for vacating an arbitration award is guided by well established principles of the law of consensual arbitration. When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement. American Universal Ins. Co. v. DelGreco, 205 Conn. 178, 185, 530 A.2d 171 (1987). When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission. Hartford v. Board of Mediation & Arbitration, 211 Conn. 7, 14, 557 A.2d 1236 (1989); New Haven v. AFSCME, Council 15, Local 530, 208 Conn. 411, 415-16, 544 A.2d 186 (1988). Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution. Middletown v. Police Local, No. 1361, 187 Conn. 228, 230, 445 A.2d 322 (1982); State v. Connecticut Employees Union Independent, 184 Conn. 578, 579, 440 A.2d 229 (1981).

We conclude, as did the trial court, that the award in this case arose out of an unrestricted submission. The authority of an arbitrator to adjudicate the controversy is limited only if the agreement contains express language restricting the breadth of issues, reserving explicit rights, or conditioning the award on court review. In the absence of any such qualifications, an agreement is unrestricted. Carroll v. Aetna Casualty & Surety Co., 189 Conn. 16, 20, 453 A.2d 1158 (1983); Bic Pen Corporation v. Local No. 134, 183 Conn. 579, 584-85, 440 A.2d 774 (1981); Bridgeport v. Bridgeport Police Local 1159, 183 Conn. 102, 106-107, 438 A.2d 1171 (1981). In the present case, the agreement provided that the "[a]rbitration shall consider and determine any and all of [the plaintiff's] claims against [the defendant]," and that "[the defendant] reserves all rights and defenses." ⁵ At oral argument in this court, the parties acknowledged that this agreement was intended to authorize the arbitrators to determine fully both the plaintiff's claims and the defendant's rights and defenses. In light of the acknowledgment that the arbitrators had unqualified authority to resolve their dispute, we conclude that their submission was unrestricted.

Even in the case of an unrestricted submission, we have, however, recognized three grounds for vacating an award: (1) the award rules on the constitutionality of a statute; Caldor, Inc. v. Thornton, 191 Conn. 336, 344, 464 A.2d 785 (1983), aff'd, 472 U.S. 703, 105 S.Ct. 2914, 86 L.Ed.2d 557 (1985); (2) the award violates clear public policy; Watertown Police Union Local 541 v. Watertown, 210 Conn. 333, 339, 555 A.2d 406 (1989); or (3) the award contravenes one or more of the statutory proscriptions of § 52-418. Carroll v. Aetna Casualty & Surety Co., supra, 189 Conn. at 22-23, 453 A.2d 1158. The defendant impliedly urges us to consider as a separate fourth ground for judicial intervention an alleged manifest disregard of the law. We decline to do so.

We have historically construed narrowly the two common law grounds for vacating an arbitration award. We denominate the constitutionality and public policy exceptions as common law grounds although we have, on occasion, implied that the basis for these grounds is to be found within the statutory scheme of § 52-418(a)(4). See, e.g., Hartford v. Board of Mediation & Arbitration, supra, 211 Conn. at 14, 557 A.2d 1236; Watertown Police Union Local 541 v. Watertown, 210 Conn. at supra, 339, 555 A.2d 406. It is more appropriate to recognize that the power to determine the constitutionality of a statute and the power to strike an arbitration ruling as violative of public policy exist apart from any particular grant of authority from the legislative branch. Because of the multiple sources authorizing judicial review of arbitration awards, we therefore deem inaccurate the implication in these earlier cases that § 52-418(a)(4) is the sole source of the court's power of review.

Our consideration of the applicability of the common law exceptions in the present circumstances persuades us that they are not applicable in this case, either directly or by way of analogy. The exception for issues of constitutionality is limited to setting aside an arbitrator's award that explicitly rules on the constitutionality of a statute. Caldor, Inc. v. Thornton, supra, 191 Conn. at 344, 464 A.2d 785. The public policy exception applies only when the award is clearly illegal or clearly violative of a strong public policy. Watertown Police Union Local 541 v. Watertown, supra, 210 Conn. at 339, 555 A.2d 406. These narrow exceptions to the general discretion of the arbitrator to decide all questions of fact and law within the scope of the submission do not encompass an alleged manifest disregard of the law. In light of the strong public policy that favors arbitration and in deference to the existing statutory scheme through which the legislature has chosen to define this field, we decline the defendant's invitation to create a new exception independent of § 52-418.

The defendant's invocation of a doctrine of manifest disregard of the law may, however, be encompassed by the existing statutory scheme for judicial review of arbitration in § 52-418. Section 52-418(a)(4) provides that an award shall be vacated if "the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made." In our construction of § 52-418(a)(4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers. New Haven v. AFSCME, Council 15, Local 530, supra, 208 Conn. at 415, 544 A.2d 186; O & G/O'Connell Joint Venture v. Chase Family Limited Partnership No. 3, 203 Conn. 133, 153, 523 A.2d 1271 (1987); Bic Pen Corporation v. Local No. 134, supra, 183 Conn. at 584, 440 A.2d 774. We...