Grp. 32 Dev. & Eng'g, Inc. v. GC Barnes Grp., LLC
| Decision Date | 09 January 2015 |
| Docket Number | CIVIL ACTION NO. 3:14-CV-2436-B |
| Court | U.S. District Court — Northern District of Texas |
| Parties | GROUP 32 DEVELOPMENT & ENGINEERING, INC., Plaintiff, v. GC BARNES GROUP, LLC, Defendant. |
Before the Court is a Motion to Vacate Ex Parte Arbitration Award (doc. 7), filed by GC Barnes Group, LLC ("GC Barnes") on August 7, 2014, as well as a Motion to Confirm Arbitration Award (doc. 8), filed by Group 32 Development & Engineering, Inc. ("Group 32") on August 26, 2014. For the reasons outlined below, GC Barnes' Motion to Vacate Ex Parte Arbitration Award is DENIED and Group 32's Motion to Confirm Arbitration Award is GRANTED.
This case arises from a dispute between the entities Group 32 and GC Barnes over the Consulting and Engagement Agreement (the "Agreement") they entered into on January 22, 2013.Mot. to Vacate 2; Mot. to Confirm 2. This Agreement, outlining the consulting services that GC Barnes was to provide to Group 32, contains the following arbitration clause:
The laws of the State of Texas thereto shall govern this agreement and all matters and issues collateral. Each party hereto irrevocably agrees that any unresolved claim or dispute arising from this Agreement or breach thereof, or default by either party, for any reason whatsoever, shall abide by, and be settled by binding arbitration with the American Arbitration Association in the State of Texas.
Mot. to Vacate 3; Mot. to Confirm 2, App. 051-55. Group 32 alleges that it paid GC Barnes $300,000.00 pursuant to the Agreement, but that GC Barnes never performed any of the required services in return. Mot. to Confirm 3. Group 32 further maintains that GC Barnes made false representations to Group 32, thus fraudulently inducing it to sign the Agreement and pay the $300,000.00. Id. Group 32 states that its Chief Executive Officer, Frederick Perkins, contacted Gregory Barnes, the managing member of GC Barnes, to "request a refund of the $300,000.00 payment," but that this communication produced no results. Id.; see also Mot. to Vacate, Decl. of Gregory Barnes 2. Group 32 explains that it subsequently attempted to resolve the dispute through several calls, emails, and demand letters. Mot. to Confirm 3, App. 001-08. However, these efforts proved unsuccessful, and as a result, on November 12, 2013, Group 32 initiated arbitration proceedings with the American Arbitration Association (the "AAA") against GC Barnes. Id., App. 031, Notice of Intent to File Demand for Arbitration; App. 032-36, Demand for Arbitration.
Group 32 claims that it provided GC Barnes with "written notice of the arbitration submission by electronic and certified mail," but that GC Barnes chose to ignore the notice it received. Mot. to Confirm 3. However, GC Barnes asserts that it never received notice of the arbitration hearing, and instead only received the following from its mail forwarding service on April4, 2014: letters indicating that copies of Group 32's filings were sent to GC Barnes by email and regular mail; bills from the AAA; and other letters stating that the hearing had already occurred. Mot. to Vacate 2-3. GC Barnes claims that it was not made aware that the arbitration hearing would take place on April 7, 2014 until it received an April 10, 2014 letter from the AAA stating that the arbitration had already occurred. Id. at 3. Therefore, GC Barnes did not appear at the April 7, 2014 hearing. Id.; Mot. to Confirm 3. Nevertheless, the arbitrator held an ex parte arbitration proceeding on that date. Mot. to Vacate 3; Mot. to Confirm 3, App. 074-77. Thereafter, the arbitrator offered the parties an opportunity to submit post-hearing briefing. Mot. to Confirm 3, App. 074. Group 32 submitted supplemental briefing, but GC Barnes does not allege that it made such an attempt to do so. Id., App. 074-78. The proceedings were subsequently closed on April 18, 2014. Id., App. 078.
In the arbitration award, signed on May 8, 2014, the arbitrator found that GC Barnes had received proper notice of the proceeding in accordance with AAA rules, and that it was liable to Group 32 in the amount of $907,232.10, comprising $300,000.00 as damages, $7,232.10 as pre-judgment interest on the damage award from November 13, 2013 until May 8, 2014, and $600.000.00 as punitive damages. Mot. to Confirm 4, App. 086. Group 32 was also awarded pre-judgment interest on "$300,000.00 from May 9, 2014 until the earlier of either the day preceding the date this amount is paid or the date preceding the date that judgment, if any, is rendered on this Award," as well as post-judgment interest and arbitration costs. Id., App. 086-87.
On May 22, 2014, Group 32 petitioned the 298th Judicial District Court in Dallas County, Texas to confirm the arbitration award. Doc. 1-4, Pet. to Confirm Arbitration Award 1. On July 7, 2014, GC Barnes removed the case to this Court. Doc. 1, Notice of Removal. GC Barnes filed its present Motion to Vacate Ex Parte Arbitration Award (doc. 7) on August 7, 2014. Group 32 thenfiled its Motion to Confirm Arbitration Award and Response to Respondent's Motion to Vacate (doc. 8) on August 26, 2014. The Motions are ripe for the Court's review.
The Federal Arbitration Act directs courts to confirm arbitration awards unless the award is vacated, modified, or corrected. 9 U.S.C. § 9. "A district court's review of an arbitration award is exceedingly narrow." Kergosien v. Ocean Energy, Inc., 390 F.3d 346, 352 (5th Cir. 2004), overruled on other grounds by Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584-86 (2008) () (quoting Prestige Ford v. Ford Dealer Computer Servs., Inc., 324 F.3d 391, 393 (5th Cir. 2003)). The Court "may not reconsider an award based on alleged errors of fact or law or misinterpretation of the contract." Nauru Phosphate Royalties, Inc. v. Drago Daic Interests, Inc., 138 F.3d 160, 164-65 (5th Cir. 1998) (citing Exxon Corp. v. Baton Rouge Oil & Chem. Workers Union, 77 F.3d 850, 853 (5th Cir. 1996)). "In other words, [the court] must affirm the arbitrator's decision if it is rationally inferable from the letter or the purpose of the underlying agreement." Executone Info. Sys. v. Davis, 26 F.3d 1314, 1320 (5th Cir. 1994) (citing Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1218 (5th Cir. 1990), cert. denied, 501 U.S. 1206 (1991)). "In determining whether the arbitrator exceeded his jurisdiction, [the court] resolve[s] all doubts in favor of arbitration." Valentine Sugars, Inc. v. Donau Corp., 981 F.2d 210, 213 (5th Cir. 1993) (citing Moses H. Cone Memorial Hosp. v. Mercury Constr., 460 U.S. 1, 24-25 (1983)).
The Federal Arbitration Act (the "FAA"), 9 U.S.C. § 1 et seq., identifies the following limited circumstances under which an arbitration award may be vacated:
9 U.S.C. § 10(a). The Supreme Court has held that the FAA provides the exclusive grounds for vacating an arbitration award. Hall St. Assocs., L.L.C., 552 U.S. at 585-86. Any alternative interpretation of the FAA "opens the door to the full-bore legal and evidentiary appeals that can 'render informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process.'" Id. at 588 (quoting Kyocera Corp. v. Prudential-Bache Trade Servs., 341 F.3d 987, 998 (9th Cir. 2003)).
Thus, "[i]n reviewing arbitration proceedings, courts are limited to the question [of] whether the proceedings were fundamentally unfair." Pac. Breakwater W., Inc. v. Wellness Int'l Network, Ltd., No. 3:97-CV-1556, 2000 WL 276812, at *6 (N.D. Tex. Mar. 9, 2000) (citing Forsythe Int'l, S.A. v. Gibbs Oil Co. of Tex., 915 F.2d 1017, 1020 (5th Cir. 1990)); see also MPJ v. Aero Sky, L.L.C., 673 F. Supp. 2d 475, 485 (W.D. Tex. 2009). A "fundamentally fair hearing requires only notice, opportunity to be heard and to present relevant and material evidence before the decision makers, and that the decision makers are not infected with bias." Id. (quoting Bowles Fin. Grp., Inc. v. Stifel, Nicolaus & Co., 22 F.3d 1010, 1013 (10th Cir. 1994)). The Fifth Circuit "examines the requirementof fundamental fairness in relation to the statutory grounds for vacatur." Id. The party moving for vacatur bears the burden of proof. MPJ, 673 F. Supp. 2d at 485.
The issue in dispute in both GC Barnes' Motion to Vacate the Arbitration Award and Group 32's Motion to Confirm the Arbitration Award is whether GC Barnes was properly notified of the arbitration proceedings and had the opportunity to be heard. GC Barnes contends that it was "not served with advance notice of the arbitration hearing and thus was not given time to respond to it," and that, as a result, its due process rights were violated. Mot. to Vacate 1. Specifically, GC Barnes alleges that the violation of its due process rights gives rise to three of the four situations allowing for vacatur of an arbitration award under the FAA: (1) the award was procured by corruption, fraud, or undue means;2 (2) the arbitrator was guilty of misconduct in refusing to postpone the hearing, upon good cause shown, or in refusing to hear pertinent and material evidence; and (3) the arbitrator exceeded her powers by going forward with the arbitration. Mot. to Vacate 3-4; see 9 U.S.C. § 10. All of GC Barnes'...
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