Gherardi v. Citigroup Global Mkts. Inc.

• Decision Date: 17 September 2020
• Docket Number: No. 18-13181,18-13181
• Citation: 975 F.3d 1232
• Parties: Christian S. GHERARDI, Plaintiff-Appellant, v. CITIGROUP GLOBAL MARKETS INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Eleventh Circuit

975 F.3d 1232

Christian S. GHERARDI, Plaintiff-Appellant,

v.CITIGROUP GLOBAL MARKETS INC., Defendant-Appellee,

No. 18-13181

United States Court of Appeals, Eleventh Circuit.

September 17, 2020

Ethan Andrew Brecher, Law Office of Ethan A. Brecher, LLC, New York, NY, Jeffrey B. Crockett, Scott A. Hiaasen, Coffey Burlington, PL, Miami, FL, for Plaintiff-Appellant.

Daniel Tramel Stabile, Shutts & Bowen, LLP, Miami, FL, for Defendant-Appellee.

Before MARTIN, GRANT, and LAGOA, Circuit Judges.

GRANT, Circuit Judge:

Christian Gherardi won a substantial arbitration award against his former employer, Citigroup Global Markets. Unhappy with its loss, Citi sought vacatur in federal court. Citi argued that because Gherardi had been an at-will employee, the arbitrators exceeded their powers by finding that he had been wrongfully terminated. The district court agreed. Gherardi's appeal presents two questions of contract interpretation. First, did the parties agree to arbitrate wrongful termination disputes? Second, was Gherardi a purely at-will employee, or did some provision in his agreements with Citigroup offer a way to contest his treatment? Our answer to the first, much easier question relieves us of the need—and the authority—to answer the second question. Citi and Gherardi agreed to arbitrate all disputes about Gherardi's employment. Under the Federal Arbitration Act, the merits of Gherardi's dispute were thus committed to the arbitrators. Citi does not get a mulligan in federal court because it identifies a possible legal error in arbitration. No doubt this is a tough rule, but it applies to employer and employee alike. The district court erred by substituting its own legal judgment for that of the arbitrators. We reverse its vacatur of the award.

I.

For roughly two decades, Christian Gherardi was a Miami-based broker and investment advisor for Citi. By all accounts, he was a star performer. Over the last five years of his employment, Gherardi never earned less than $750,000. But despite his financial success, Gherardi had a few problems at the office.

According to Citi, Gherardi engaged in "inappropriate and abusive behavior towards colleagues." In June of 2015, Gherardi received a "final warning" letter reprimanding him for an incident where he was "aggressive towards a fellow employee and shouted profane language." Some five months later, Gherardi emailed Citi's Human Resources Department threatening to challenge the warning letter in arbitration. Citi fired him some three days later.

Gherardi initiated arbitration against Citi. He argued that because Citi feared that he would join a competitor firm—and take his 500–600 clients with him—it tried to make him unemployable by firing him "for cause." Among other things, Gherardi brought claims for defamation based on Citi's explanation of termination, wrongful termination in violation of the anti-retaliation provision, and wrongful termination in violation of "the common law of securities arbitration, which provides that registered persons are not at-will employees." He sought $16.5 million in damages.

At the time of Gherardi's termination, he and Citi were parties to three relevant agreements: the 2015 Citi U.S. Employee Handbook, an Employment Arbitration Policy (appended to the Handbook), and a Dual Employment Agreement. Within these three agreements, five provisions are especially relevant:

• First , the Dual Employment Agreement said that Gherardi was an at-will employee. This meant that his employment could be "terminated at any time and for any reason or no reason, not otherwise prohibited by law, by any party."

• Second , the Handbook noted that "[e]xcept for the Employment Arbitration Policy, nothing contained in this Handbook, nor the Handbook itself, is a contract of employment."

• Third , the Arbitration Policy required "all employment-related disputes" between Gherardi and Citi to be arbitrated "under the auspices of the Financial Industry Regulatory Authority, Inc."

• Fourth , the Arbitration Policy said that it did not "constitute, nor should it be construed to constitute, a waiver by Citi of its rights under the ‘employment-at-will’ doctrine nor" did "it afford an employee or former employee any rights or remedies not otherwise available under applicable law."

• Fifth , the Arbitration Policy stated that "[r]etaliation against employees who file a claim under this Policy, including claims regarding the validity of this Policy or any provision thereof, is expressly prohibited."

The arbitration panel unanimously awarded Gherardi nearly $4 million, including $3,452,000 as compensatory damages for wrongful termination. The panel did not make specific findings or explain its reasoning, but it was not legally required to do so. Gherardi moved to confirm the award in federal district court. Citi opposed confirmation and moved to vacate.¹ The district court granted Citi's motion to vacate with respect to the wrongful termination portion of Gherardi's award. This appeal followed.

II.

The district court determined that 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)(4). This was a legal determination that we review de novo. See Wiregrass Metal Trades Council AFL-CIO v. Shaw Envtl. & Infrastructure, Inc. , 837 F.3d 1083, 1087 (11th Cir. 2016).

III.

A.

Litigation is our default adjudicative process, but it is not the only possible process. Private arbitration has existed at least since the Roman Empire. See Pandects of Justinian, Bk. 4, Title 8. In the United States, though arbitration has long been available, we have historically seen "widespread judicial hostility to arbitration agreements." AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) ; see, e.g. , Aktieselskabet Korn-og Foderstof Kompagniet v. Rederiaktiebolaget Atlanten , 250 F. 935, 937 (2d Cir. 1918), decree aff'd , 252 U.S. 313, 316, 40 S.Ct. 332, 64 L.Ed. 586 (1920) (breach of arbitration agreement results in nominal damages); Wood v. Lafayette , 46 N.Y. 484, 489–90 (N.Y. 1871) (arbitration agreement can be unilaterally revoked); Taylor v. Sayre , 24 N.J.L. 647, 650 (N.J. 1855) (courts can correct an arbitrator's legal error). Eventually, the political branches tired of the courts’ uneven enforcement practices. In 1925, Congress passed the Federal Arbitration Act, which said that written arbitration contracts were "valid, irrevocable, and enforceable." 9 U.S.C. § 2.

Under the FAA, federal courts have limited authority to vacate or modify an arbitration award.² Vacatur is allowed "only in very unusual circumstances," and those "very unusual circumstances" are described in the statute.³ First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 942, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). The first three—corruption or fraud, bias, and procedural misconduct—are not at issue in this appeal. See 9 U.S.C. § 10(a)(1)–(3). The court below relied on the fourth and final enumerated circumstance, which permits vacatur if "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." Id. § 10(a)(4).

Following Supreme Court precedent, we have interpreted § 10(a)(4) ’s language narrowly—very narrowly. The essential principles of our review, though often recited, are worth repeating. Judicial review of arbitration decisions is "among the narrowest known to the law." Bamberger Rosenheim, Ltd. v. OA Dev., Inc. , 862 F.3d 1284, 1286 (11th Cir. 2017) (quoting AIG Baker Sterling Heights, LLC v. Am. Multi-Cinema, Inc. , 508 F.3d 995, 1001 (11th Cir. 2007) ). Arbitrators do not exceed their powers when they make errors, even "a serious error." Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp. , 559 U.S. 662, 671, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). That means, however difficult it may be, "we must defer entirely to the arbitrator's interpretation of the underlying contract no matter how wrong we think that interpretation is." Wiregrass , 837 F.3d at 1087 ; see also Inversiones y Procesadora Tropical INPROTSA, S.A. v. Del Monte Int'l GmbH , 921 F.3d 1291, 1303 (11th Cir. 2019). In fact, under our current scheme, an arbitrator's actual reasoning is of such little importance to our review that it need not be explained—the decision itself is enough. See O.R. Sec., Inc. v. Prof'l Planning Assocs., Inc. , 857 F.2d 742, 747 (11th Cir. 1988).

This rule can be a tough pill to swallow for a losing party subjected to what seems like a legally questionable interpretation. And courts are understandably protective of our interpretative authority. But we have good reason to defer to the arbitrator's reasoning, even when it is different than our own. Arbitration agreements are contracts where the bargain is for the arbitrator's construction of the underlying agreements, rather than for any particular outcome. See Oxford Health Plans LLC v. Sutter , 569 U.S. 564, 569, 133 S.Ct. 2064, 186 L.Ed.2d 113 (2013) ; United Steelworkers of Am. v. Enter. Wheel & Car Corp. , 363 U.S. 593, 599, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960).

So if even serious interpretive error does not justify vacatur under § 10(a)(4), that invites an obvious question: what does? Vacatur is permitted only when an arbitrator "strays from interpretation and application of the agreement and effectively dispenses his own brand of industrial justice." Major League Baseball Players Ass'n v. Garvey , 532 U.S. 504, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) (citation and punctuation omitted). Here are some illustrative examples: awarding relief on a statutory claim when the arbitration agreement allows only for arbitration of contractual claims, see Paladino v. Avnet Comput. Techs., Inc. , 134 F.3d 1054, 1061 (11th Cir. 1998) ; failing to give preclusive effect to an issue already (and properly) decided by a court, see Kahn...