Laprade v. Kidder, Peabody & Co., Inc.

• Decision Date: 29 February 2000
• Docket Number: Civil Action No. [74-1] [74-2] [74-3] [76-1] [76-2].,Civil Action No. 91-3330 (EGS).
• Citation: 94 F.Supp.2d 2
• Parties: Linda E. LaPRADE, Plaintiff, v. KIDDER, PEABODY & CO., INC., Defendant.
• Court: U.S. District Court — District of Columbia

94 F.Supp.2d 2

Linda E. LaPRADE, Plaintiff, v. KIDDER, PEABODY & CO., INC., Defendant.

Civil Action No. 91-3330 (EGS).

Civil Action No. [74-1] [74-2] [74-3] [76-1] [76-2].

United States District Court, District of Columbia.

February 29, 2000.

John C. LaPrade, LaPrade, & Associates, Washington, DC, Blaine Howell Bortnick, Liddle & Robinson, L.L.P., New York City, for Linda E. LaPrade.

Linda E. LaPrade, Bethesda, MD, pro se.

Anthony Craig Roth, Kathy Butler Houlihan, Morgan, Lewis & Bockius, L.L.P., Washington, DC, Robert A.W. Boraks, Garvey, Schubert & Barer, Washington, DC, Andrew J. Schaffran, Morgan, Lewis & Bockius, New York City (pro hac vice), for Kidder Peabody & Co., Inc.

MEMORANDUM OPINION

SULLIVAN, District Judge.

This case comes before the Court for consideration of defendant's motion to lift the stay, confirm the arbitration award, and enter judgment, and plaintiff's cross motion to confirm the arbitration award in part, and to vacate the award in part, and to enter judgment. After consideration of the parties' cross motions, the memoranda and materials in support, the responses in opposition, and the replies in support, and for the following reasons, defendant's motion is GRANTED, and plaintiff's motion is DENIED.

I. Factual Background

Plaintiff Linda LaPrade filed suit against defendant Kidder Peabody alleging gender discrimination in employment. Per an earlier agreement between the parties, and upon defendant's motion, the court stayed LaPrade's civil action pending arbitration on June 24, 1992.¹ Arbitration hearings commenced in September 1993.

On October 8, 1999, after six years, the National Association of Securities Dealers ("NASD") Arbitration Panel ("the Panel") rendered its decision dismissing plaintiff's statutory discrimination claims, as well as her defamation claims, in their entirety. The Panel further ordered that defendant pay plaintiff $65,000 inclusive of interest, that plaintiff pay 12% of the NASD forum fees assessed, or $8,376, and that defendant pay 88% of the forum fees, or $61,424. Finally, the panel ordered that each party pay its own attorneys' fees and costs.

II. Procedure

On October 9, 1999, defendant filed a motion to lift the stay, to confirm the arbitration award, and to enter judgment. Plaintiff filed a cross motion to confirm and vacate different parts of the arbitration award, and to enter judgment, as well as a motion in opposition to defendant's motion to confirm the arbitration award. Plaintiff's cross motion opposes Kidder Peabody's motion only in so far as it seeks to confirm that part of the award that requires plaintiff to pay $8,376 in arbitration fees. Thereafter, replies were filed by the parties.

III. Discussion

A. Jurisdiction

A federal court may lift a stay of proceedings to confirm an arbitration award. See Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C.Cir. 1991) (district court lifted stay of diversity action to confirm arbitration award and order entry of judgment). Moreover, this Court stayed this case pending arbitration and retained jurisdiction for purposes of any appropriate proceedings upon completion of arbitration. See LaPrade v. Kidder, Peabody & Co., 146 F.3d 899, 903 (D.C.Cir.1998), cert. den., 525 U.S. 1071, 119 S.Ct. 804, 142 L.Ed.2d 664 (1999) (holding that court that stays civil action pending arbitration retains jurisdiction to confirm arbitration award). Further, pursuant to the NASD Code of Arbitration Procedure § 10330(a), the parties in this case agreed that any arbitration award could be entered as a judgment in a court of competent jurisdiction. Thus, this Court properly retained jurisdiction.

B. Standard of Review for Arbitration Awards

Generally, public policy favors leaving arbitration awards untouched. See Wall Street Associates, L.P. v. Becker Paribas, Inc., 818 F.Supp. 679, 682 (S.D.N.Y. 1993) (citing Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987)). In addition, a court must confirm an arbitration award where some colorable support for the award can be gleaned from the record. See Sargent v. Paine Webber Jackson & Curtis, Inc., 882 F.2d 529, 532 (D.C.Cir.1989). Arbitration awards are subject to "very limited review" to avoid undermining the goals of arbitration namely, settling disputes efficiently and avoiding lengthy and expensive litigation. Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12 (2d Cir.1997). Accordingly, reviewing courts have broad latitude to confirm arbitration awards.

Concomitantly, the grounds for disturbing arbitral awards are very narrow. The standard of review for arbitration awards is articulated in the Federal Arbitration Act ("FAA"). 9 U.S.C. §§ 1-14 (West 1990). Under the FAA, a court must grant a request for confirmation unless the award is "vacated, modified, or corrected." 9 U.S.C. § 9 (West 1990). In addition, the FAA, empowers a federal court to vacate an arbitration award

(1) where the award was procured by corruption, fraud, or undue means.

(2) where there was evident partiality or corruption in the arbitrators, or either of them.

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

(4) where 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.

Moreover, "[c]ourts have also recognized a limited nonstatutory ground for vacating an arbitration award where the arbitrator has acted in `manifest disregard of the law.'" In the Matter of Baird, 939 F.Supp. 15, 16 (D.D.C.1996) (citing Al-Harbi v. Citibank, 85 F.3d 680, 682 (D.C.Cir.1996)) (citing Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C.Cir.1991)) (citing Wilko v. Swan, 346 U.S. 427, 436, 74 S.Ct. 182, 187, 98 L.Ed. 168 (1953) (dicta)); cf. First Options of Chicago v. Kaplan, 514 U.S. 938, 942, 115 S.Ct. 1920, 1923, 131 L.Ed.2d 985 (1995) (holding that an arbitration award will be set aside only if the award was made in ... "`manifest disregard' of the law").²

Predictably, "manifest disregard" is a very high standard of review. The United States Court of Appeals for the District of Columbia has explained that "manifest disregard of the law may be found if [the] arbitrator[s] understood and correctly stated the law but proceeded to ignore it." Kanuth, 949 F.2d at 1179. The implicit assumption in this test is that "the law" that the arbitrators ignored is clear and unambiguous. In its "manifest disregard" test, the Second Circuit has explicitly added that implicit assumption: "(1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether, and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case." DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 821 (2d Cir.1997), cert. den., 522 U.S. 1049, 118 S.Ct. 695, 139 L.Ed.2d 639 (1998).³ The burden falls on the party seeking to alter the arbitration award — here, plaintiff — to "establish that the arbitrators appreciated the existence of a governing legal principle but expressly decided to ignore it." Johnston Lemon & Co., Inc., v. Smith, 886 F.Supp. 54, 56 (D.D.C. 1995) (citing Kanuth, 949 F.2d at 1182).

The contours of the manifest disregard standard are nebulous. It is clear that this standard does not authorize a district court to "conduct the same de novo review of questions of law that an appellate court exercises over lower court decisions." In the Matter of Baird, 939 F.Supp. 15, 17 (D.D.C.1996) (citing AlHarbi, 85 F.3d at 684). It is also clear that an arbitration panel is free to consider and reject the parties' arguments in due course. Id. at 17. Arguably, the manifest disregard standard demands "more than error or misunderstanding with respect to the law." Id. However, on a spectrum with fair consideration and rejection of an argument at one end, and clear misconduct at the other, it is unclear where manifest disregard falls. While it definitely falls closer to clear misconduct, whether it is a hair's width away, or an arm's length away, is uncertain. Here, plaintiff makes no claim that any of the four enumerated grounds is present. Therefore, the Court must review the arbitral award under the manifest disregard standard.

C. Plaintiff's "Manifest Disregard" Showing

Plaintiff claims that her arbitration panel disregarded this circuit's law concerning allocation of arbitral fees. Therefore, plaintiff must show that the governing law is well-defined and clearly applicable, that the Panel was aware of the governing law, and that the Panel expressly sidestepped it. In addition, there must be no colorable support for the Panel's award in the record; if it seems that the Panel rejected plaintiff's argument after fair consideration, then plaintiff's showing falls short, and the Court must enter the Panel's judgment.

1. The Panel's Knowledge of the Governing Law

Taking the steps of plaintiff's showing out of turn, plaintiff has shown that the Panel was aware of what she contends is our circuit's arbitral fee allocation jurisprudence. As proof of the Panel's knowledge, plaintiff submitted a series of letters from plaintiff to the Panel and from defendant to the Panel arguing the parties' respective interpretations of the governing law. These letters, and, in particular, the August 26, 1999 letter from Valerie Bailey Johnston to plaintiff's counsel informing him that the parties' letters discussing the allocation of arbitral fees had been forwarded to the Panel, demonstrated that the Panel was well aware of plaintiff's fee allocation arguments.⁴

2. The Governing Law Concerning Allocation of Arbitral Fees

Howeve...