Mitchell v. Franchise Servs. of N. Am. Inc.

• Decision Date: 19 November 2019
• Docket Number: CIVIL ACTION No.: 3:18-CV-723-HTW-LRA
• Parties: DAVID M. MITCHELL PLAINTIFF v. FRANCHISE SERVICES OF NORTH AMERICA, INC. DEFENDANT
• Court: U.S. District Court — Southern District of Mississippi

DAVID M. MITCHELL PLAINTIFF v. FRANCHISE SERVICES OF NORTH AMERICA, INC. DEFENDANT

CIVIL ACTION No.: 3:18-CV-723-HTW-LRA

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI NORTHERN DIVISION

November 19, 2019

ORDER

BEFORE THIS COURT are the following motions: Motion to Dismiss or Stay Proceedings [Docket no. 3] filed by defendant Franchise Services of North America, Inc. (hereinafter referred to as "FNSA" or "Defendant"); and Motion for Judgment on the Pleadings [Docket no. 9] filed by Plaintiff David M. Mitchell (hereinafter referred to as "Plaintiff"). The two (2) motions are related in that FNSA asks this court to stay these proceedings or dismiss them pending a ruling by the arbitrator on the outstanding attorney fees question. Plaintiff, on the other hand, asks this court to confirm the arbitrator's bifurcated award. After reviewing the motions of the parties and the relevant jurisprudence, this court is persuaded to rule for the plaintiff and against the defendant for the reasons following.

I. PROCEDURAL HISTORY

Mitchell and FSNA entered into a written Employment Agreement on August 9, 2013. Mitchell, the former Chief Financial Officer of FSNA, left FSNA in February, 2014. FSNA refused to pay Mitchell severance benefits, that Mitchell alleged were owed under his Employment Agreement - a circumstance that the arbitrator ultimately found in favor of Mitchell.

The Employment Agreement between the parties contained a binding arbitration clause. Mitchell and FSNA, therefore, arbitrated Mitchell's claim for severance benefits. The parties filed their arbitration case on August 5, 2014. The arbitrator purportedly set the case for hearing on multiple occasions (although the parties fail to discuss the particulars of such) and, according to Mitchell, FSNA repeatedly attempted to delay those hearings. On April 18, 2018, the arbitrator dismissed FSNA's counter-claim for failure to comply with the arbitrator's orders and for discovery violation.

Mitchell proposed, and FSNA consented during a conference with the Arbitrator, to bifurcate the arbitration into two parts. As stated in the Arbitrator's "Order Bifurcating Proceedings on Attorney Fees, Costs, and Expenses":

Plaintiff David Mitchell proposed, via ore tenus Motion, that the parties' claims for attorney fees, costs and expenses should be bifurcated, and determined after the Arbitrator decides which party or parties prevail on the merits of this case. The Arbitrator discussed that proposal with all counsel, and no objections were stated. Having considered the premises, it is ORDERED that the final hearing in this case shall be bifurcated as follows: After the Arbitrator renders a decision on the merits of the case, the prevailing party or parties will submit evidence in support of claims for attorney fees, expenses, fees and costs of the arbitration. If the amounts thereof are disputed, the Arbitrator will establish a procedure for determining the amounts. A separate Order will then be entered with respect to any claims for attorney fees, expenses, and expenses and costs of the arbitration.

The arbitrator held the arbitration hearing May 23 through May 25, 2018. After four years of arbitrating, the arbitrator ultimately found that FSNA had breached the Employment Agreement and awarded Mitchell $452,417, plus interest in the amount of $99.16 running from June 1, 2018.

The Arbitrator declared that the October 11, 2018 Award was final. The Arbitrator's Award stated:

Pursuant to Miss. R. Civ. P. 54(b), I find that this award fully disposes of Mitchell's claim for principal and interest. I hereby enter a final judgment on the claims that are decided herein, because there is no just reason for delay in enforcement of this award. This is also a Rule 54(b) judgment dismissing FSNA's counterclaim. Mitchell is hereby authorized to collect the amounts awarded herein, and to take any and all proper actions to enforce this award, while the bifurcated claims remain pending.

The Arbitrator expressly ordered that Mitchell could immediately seek judicial confirmation of the award:

In this case, there remains a significant matter to be resolved— the amount of fees, costs, and expenses to be recovered by Mitchell as the prevailing party, in accordance with the terms of the Employment Agreement. However, this case has been pending for four years, and I find there is no just reason for delay in Mitchell's collection of the Award set forth herein. Therefore, this Award is certified as a Final Judgment as to the claims resolved herein, and Mitchell may proceed with enforcing the Award as a Judgment by any means proper, including seeking judicial confirmation and enforcement.

II. ANALYSIS

Defendant argues that the decision of the arbitrator is not ripe for confirmation by this court because the arbitrator withheld jurisdiction to decide attorney fees and costs. According to defendant, the arbitrator certified his "non-final award" under Rule 54(b) of the Mississippi Rules of Civil Procedure, which contemplates judgments only. The arbitrator's award in this case, says defendant, does not qualify as a judgment, merely an award and, thus, is not ripe for confirmation by this court. Even were Rule 54 to apply, argues defendant, plaintiff has failed to satisfy the "multiple claims, multiple parties" burden.

Plaintiff, aggrieved, responds that the Federal Arbitration Act (hereinafter referred to as the "FAA") allows for judicial confirmation of a final arbitration award - whether such be a partial or complete resolution of the case in arbitration.

A circuit split apparently exists whether a United States District Court may confirm a partial arbitrator's award:

We note that a circuit split exists as to whether federal courts may hear an interlocutory appeal from an arbitral tribunal. Compare Dealer Computer Servs., Inc. v. Dub Herring Ford, 547 F.3d 558 (6th Cir.2008) (holding that an arbitration panel's partial ruling that the contract did not bar class proceedings was not ripe for review because the arbitrators had not yet determined that class arbitration should proceed), with Hart Surgical, Inc. v. Ultracision, Inc., 244 F.3d 231, 234 (1st Cir.2001) (holding that the Federal Arbitration Act permits a district court to confirm or vacate an arbitration panel's "partial award"). The Supreme Court has allowed such an appeal in certain limited circumstances. See Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., — U.S. —, —n. 2, 130 S.Ct. 1758, 1767 n. 2, 176 L.Ed.2d 605 (2010). Because this order dismisses the appeal without a decision, weexpress no opinion as to whether jurisdiction would exist on the facts presented here."

Louisiana Health Serv. Indem. Co. v. DVA Renal Healthcare, Inc., 422 F. App'x 313, 314 (5th Cir. 2011).

a. Confirmation of Arbitration Awards

"The Federal Arbitration Act (FAA or Act), 9 U.S.C. § 1 et seq., provides for expedited judicial review to confirm, vacate, or modify arbitration awards. §§ 9-11 (2006 ed.)." Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S.Ct. 1396, 1400, 552 U.S. 576, 578 (2008) (emphasis added). The Fifth Circuit has acknowledged the "summary nature of proceedings to confirm an arbitration award" and "the strong policy favoring expeditious enforcement of arbitration awards." Woods v. P.A.M. Transport Inc.-L.U., 440 Fed.Appx. 265, 268, 2011 WL 3831306, at *2 (5th Cir. 2011). "The confirmation of an arbitration award is a summary proceeding that converts a final arbitration award into a judgment of the court." Variable Annuity Life Ins. Co. v. Bencor, Inc., 2006 WL 1492249, at *2 (S.D.Tex. 2006).

"Section 9 of the Federal Arbitration Act requires the Court, upon motion of a party, to confirm an arbitration award 'unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of [the FAA].'" Morgan Keegan & Co., Inc. v. Sturdivant, No. 3:11cv638-DPJ-FKB, 2012 WL 3685975, *1 (S.D. Miss. 8/24/2012). Judicial review of an arbitration award is "extraordinarily narrow" and "exceedingly deferential." Cooper v. WestEnd Capital Management, L.L.C., 832 F.3d 534, 543-44 (5^th Cir. 2016).

As this Court has explained:

The Court may vacate an arbitrator's award in the following limited circumstances set forth in section 10:

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

(2) where there was evident partiality or corruption in the arbitrator;(3) where the arbitrator was 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; or

(4) where the arbitrator exceeded his powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

Richards v. Gibson, 2016 WL 3659917, at *1 (S.D.Miss. 2016). "It is Defendants' burden to show that the arbitration award should not be enforced on one or more of these grounds." Id., citing 21st Fin. Servs., L.L.C. v. Manchester Fin. Bank, 747 F.3d 331, 336 (5th Cir. 2014) and Parker v. J C Penney Corp., Inc., 426 Fed.Appx. 285, 288 (5th Cir. 2011).

Under Title 9 U.S.C. § 12, a petition to vacate an arbitration award must be "served upon the adverse party or his attorney within three months after the award is filed or delivered." The three-month bar applies to efforts to avoid an arbitration award based on statutory grounds. See Arriola v. Martinez, 2016 WL 8229283 (7/15/2016 W.D. Tex.). The three-month time limit applies not only to petitions to vacate awards, but also to defenses to confirmation petitions. International Union of Operating Engineers, Local No. 841 v. Murphy Co., 82 F.3d 185, 188 (7th Cir.1996).¹

The three-month deadline to challenge an arbitration award is absolute, and not subject to a "discovery rule" or "equitable tolling." Cigna Ins. Co. v. Huddleston, 1993 WL 58742, at *11 (5th Cir. 1993).

The confirmation...