In re Rollings, Inc. (Black)

• Decision Date: 20 August 2004
• Docket Number: Case No. 3:03-cv-772-J-99MMH.
• Citation: 552 F.Supp.2d 1318
• Parties: In the Matter of the Arbitration Between ROLLINS, INC. and Orkin Inc., Petitioners, and Collier BLACK, Respondent.
• Court: U.S. District Court — Middle District of Florida

552 F.Supp.2d 1318

In the Matter of the Arbitration Between ROLLINS, INC. and Orkin Inc., Petitioners, and Collier BLACK, Respondent.

Case No. 3:03-cv-772-J-99MMH.

United States District Court, M.D. Florida, Jacksonville Division.

August 20, 2004.

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Douglas B. Brown, Michael R. Holt, Darren Keith McCartney, Rumberger, Kirk & Caldwell, PA, Orlando, FL, William J. Nissen, Sidley, Austin, Brown & Wood, Chicago, IL, for Petitioners.

Alan S. Wachs, Christopher Todd Harris, Leslie A. Wickes, Volpe, Bajalia, Wickes, Rogerson & Wachs, Daniel Kearney Bean, Holland & Knight, LLP, Jacksonville, FL, Christian D. Searcy, Harry A. Shevin, Sean C. Domnick, Searcy, Denney, Scarola, Barnhart & Shipley, PA, West Palm Beach, FL, for Respondent.

ORDER

HARVEY E. SCHLESINGER, District Judge.

Before the Court are Respondent's Motion to Confirm Arbitration Award (Doc. No. 10, filed October 24, 2003); Petitioner's Response (Doc. No. 32, filed November 21, 2003); Petitioner's Amended Motion to Vacate Arbitration Award (Doc. No. 25. filed November 3, 2003); Respondent's Response (Doc. No. 40, filed December 10, 2003); Petitioner's Motion to Vacate Second Arbitration Award (Doc. No. 33, filed November 21, 2003); Respondent's Response (Doc. No. 43, filed December 12, 2003); Petitioner's Motion to Vacate Third Award (Doc. No 47, filed February 19, 2004); Respondent's Response (Doc. No. 54. filed March 16, 2004); Respondent's Amended Motion to Confirm Arbitration Award (Doc. No. 56, filed April 26, 2004); and finally Petitioner's Response (Doc. No. 57, filed May 10, 2004).

Also, there are several requests for oral argument: Petitioner's Request for Oral Argument (Doc. No. 20, filed October 29, 2003); Petitioner's Motion for Oral Argument on the Motion to Vacate Second Arbitration Award (Doc. No. 35, filed November 21, 2003); Petitioner's Motion for Oral Argument on the Motion to Vacate Third Arbitration Award (Doc. No. 50, filed February 19, 2004); all of which are DENIED.

I. Background

Pursuant to the Parties' contract, they engaged in arbitration administered by the American Arbitration Association (AAA) to settle disputes arising from their contract, and "[t]he award of the arbitrators issued pursuant hereto shall be final, binding and non-appealable." The facts of the underlying dispute are not germane to this decision; suffice it to say, that Respondent was not satisfied with Petitioners' pest control services.

The Arbitration Panel heard from both Parties from July 28 to August 5, 2003 and issued several relevant rulings. On September 4, 2003, AAA faxed the Parties a copy of what the Panel called "Interim Arbitration Findings and Award" (Interim Award).¹ In the Interim Award, the Panel found in favor of Respondent on Count I, Breach of Contract, and Count IV, Florida's Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201 (FDUTPA). The Panel found in favor of Petitioners on the remaining counts, which the Panel did not list but are: Count II, Civil Remedies for Criminal Acts; Count III, Misleading Advertisement; Count V. Declaratory Relief; Count VI, Negligence; Count VII, Fraud; Count VIII, Agency; Count IX, Joint Venture; Count X. Joint Enterprise; and Count XI, Alter Ego. The Panel also found in favor of Respondent on Petitioners' counterclaim. The Panel awarded Respondent $750,000.00 in compensatory damages, without specifying under which count, and $2,250,000.00 in punitive damages under FDUTPA. Additionally, the Panel found that Respondent was entitled to attorneys' fees under the contract and under FDUTPA, but the amount of attorneys' fees was to be determined at a later date. The Panel concludes with the following two sentences: "This Award shall be paid within thirty (30) days from the date of this signed Award. This Award shall remain in full force and effect until such time as a final Award is rendered."

On November 12, 2003, the Panel, sua sponte, issued "Supplemental Interim Arbitration Findings and Award" (Supplemental Award).² In the Supplemental Award, the Panel found for the Respondent on Count I and Count IV, as it had done in the Interim Award, but the Panel also found in favor of Respondent on three additional counts: Count VI, Negligence; Count VII, Fraud; and Count XI, Alter Ego. The Panel again found in favor of Petitioner on the remaining claims and for the Respondent on the counterclaim. The Panel again awarded $750,000.00 in compensatory damages without specifying to which count the award was pursuant. The Panel also again awarded $2,250,000.00, but this time did not state its basis for the award of punitive damages. Like the Interim Award, the Supplemental Award awarded Respondent attorneys' fees in an amount to be determined later. The Supplemental Award does not contain as much detail regarding the justification for the award of punitive damages, but does provide several reasons for the punitive damages. The Supplemental Award concludes with the same two sentences as the Interim Award.

In early December of 2003, the Panel issued what is entitled "Award of the Arbitrators" (Third Award). In the Third Award, the Panel awarded Respondent attorneys' fees of $975,000.00 and fees and costs of $189,902.00. The Panel also concluded that Petitioners would bear the administrative fees and expenses of the AAA which totaled $88,783.29. Upon Respondent's motion, the Panel clarified the Third Award to incorporate the Interim and Supplemental Awards. After the Interim Award but before the Supplemental Award. Petitioners filed suit in this Court seeking to vacate the Interim Award.

II. Standard of Review

Judicial review of completed arbitration is limited, and there is a presumption that arbitration awards will be confirmed. See Booth v. Hume Publ'g, Inc., 902 F.2d 925, 932 (11th Cir.1990). Pursuant to the Federal Arbitration Act (FAA), a court is to vacate an award when 1) the award was procured by corruption, fraud, or undue means; 2) there was evident partiality or corruption; 3) the arbitrators were guilty of misconduct in refusing to hear evidence, postpone a hearing, or other misbehavior that prejudiced a party; or 4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final, and definite award was not made. 9 U.S.C. § 10(a)(1-4). A court may, however, correct or modify an award when 1) there was an "evident material miscalculation" of "evident material mistake" in the description of a person or thing; 2) the arbitrators ruled on a matter not presented to them; or 3) the award is imperfect in matter of form not affecting the merits of the controversy. 9 U.S.C. § 11(a-c). Also, a court is to vacate an award entered in "manifest disregard of the law" or if the award is irrational or arbitrary and capricious³ Montes v Shearson Lehman Bros., Inc., 128 F.3d 1456, 1460-62 (11th Cir.1997): Ainsworth v. Skurnick, 960 F.2d 939, 941 (11th Cir. 1992). A panel manifestly disregards the law when the record indicates that the panel knew the law and disregarded it. See O.R. Sec. Inc. v. Profl Planning Assocs., Inc., 857 F.2d 742, 747 (11th Cir. 1988). Manifest disregard for the law is distinguished from a mere error in interpreting the law, which does not justify reversal. See Montes, 128 F.3d at 1460.

III. Analysis

Before a discussion of the merits of the Panel's awards, the Court must first decide several preliminary issues: whether the Court has the authority to review the Panel's decision and whether the Supplemental Award is a valid award.

A. Review of a Final, Binding, and Non-appealable Award

As a threshold matter, Respondent argues that the Court does not have jurisdiction over this case, because the Parties agreed that the Panel's award was binding, final, and non appealable. The Court disagrees. Courts have consistently respected the wishes of parties when they contract to be bound by certain provisions and particular methods of arbitration. See First Options of Chicago v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (finding that arbitration is a matter of contract between the parties); Bowen v. Amoco Pipeline Co., 254 F.3d 925, 934 (10th Cir.2001) (holding that parties are free to negotiate arbitration agreements and that the primary purpose of the FAA is to ensure judicial enforcement of private agreements); Gateway Techs., Inc. v. MCI Telecomm. Corp., 64 F.3d 993, 996-97 (5th Cir.1995) (enforcing modified scope of review as agreed to by the parties). However, several circuit and district courts, although not in the Eleventh Circuit, have held that the words final, binding, and non-appealable in an arbitration agreement do not bar judicial review of a panel's decision. See Dean v. Sullivan, 118 F.3d 1170, 1171 (7th Cir.1997) (holding that even though final and binding arbitration must be just that if arbitration is to serve its purpose, final and binding does not preclude all judicial review); Goodallr-Sanford v. United Textile Workers of America, AFL, Local 1802, 233 F.2d 104, 107 (1st Cir.1956) (affd, 353 U.S. 550, 77 S.Ct. 920, 1 L.Ed.2d 1031); Baugher v. Dekko Heating Technologies, 202 F.Supp.2d 847, 850 (N.D.Ind.2002); Team Scandia, Inc. v. Greco, 6 F.Supp.2d 795, 798 (S.D.Ind.1998); see also Brotherhood of Railroad Trainmen v. Central of Georgia Railway Co., 415 F.2d 403, 412-13 (5th Cir.1969) (holding that finality is a "mirage" if used to preclude judicial review of an agency's decision). Although limited, judicial review is necessary to prevent "runaway arbiters."⁴ Dean, 118 F.3d at 1171. Accordingly, the Court will review the Panels decisions under the limited review as outlined by case law and in the FAA.

B. Effect of Supplemental Award

Next, the Court turns to the Supplemental and Third Award and whether the Panel exceeded its authority under the arbitration rules and the doctrine of functus officio.

1. Rules of the AAA.

The Panel issued two awards, the Interim...