MORELAND v. PERKINS

• Decision Date: 01 October 2010
• Docket Number: 629.,No. 102,102
• Citation: 240 P.3d 601
• Parties: Jack W. MORELAND, Appellee, v. PERKINS, SMART & BOYD, Appellant.
• Court: Kansas Court of Appeals

240 P.3d 601

Jack W. MORELAND, Appellee, v. PERKINS, SMART & BOYD, Appellant.

No. 102,629.

Court of Appeals of Kansas.

Oct. 1, 2010.

COPYRIGHT MATERIAL OMITTED.

Syllabus by the Court

1. The Kansas Uniform Arbitration Act (Act), K.S.A. 5-401 et seq. , permits an appeal from an order confirming or vacating an arbitration award, pursuant to K.S.A. 5-418(a).

2. On appeal, an appellate court's standard of review of an arbitration award is highly deferential and the court must affirm an arbitration award if the arbitrator acted within the scope of his or her authority. As long as errors are not in bad faith or so gross as to amount to affirmative misconduct, the court is bound by an arbitrator's findings of fact and conclusions of law.

3. An arbitrator is not required to provide the reasons for his or her award. The district court must presume an award is valid unless one of the specific grounds in K.S.A. 5-412(a) is proven.

4. K.S.A. 5-412(a) sets forth five limited circumstances in which an arbitration award must be vacated: “(1) The award was procured by corruption, fraud or other undue means; (2) There was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or misconduct prejudicing the rights of any party; (3) The arbitrators exceeded their powers; (4) The arbitrators refused to postpone the hearing upon sufficient cause being shown therefore or refused to hear evidence material to the controversy or otherwise so conducted the hearing, contrary to the provisions of K.S.A. 5-405, as to prejudice substantially the rights of a party; or (5) There was no arbitration agreement and the issue was not adversely determined in proceedings under K.S.A. 5-402 and the party did not participate in the arbitration hearing without raising the objection; But the fact that the relief was such that it could not or would not be granted by a court of law or equity is not ground for vacating or refusing to confirm the award.”

5. Arbitration awards, which courts regard as valid and suitable for judicial enforcement, are neither contract nor judgment but partake of the nature of both. The award partakes of the nature of a contract because it is the result of a contract, the submission agreement, whereby the parties agree to comply with the award. It differs from a contract in that it is the act of the arbitrators, not of the parties themselves. It partakes of the nature of a judgment in that, if it is valid, it is binding upon them though imposed by an outside source.

6. The dual nature of the award serves to explain the limited grounds on which it may be successfully impeached. In general it may be said that the ground urged must be good, both for attack upon a judgment and for relief against the terms of a contract. But, certain grounds that would be sufficient in an appeal from a judgment would not be grounds for impeaching an award, for the reason that the contractual element is present in the award. Thus, the fact that the arbitrator made erroneous rulings during the hearing, or reached erroneous findings of fact from the evidence, is no ground for setting aside the award, because the parties have agreed that the arbitrator should be the judge of the facts. Even the arbitrator's erroneous view of the law would be binding, for the parties have agreed to accept the arbitrator's view of the law. Were it otherwise, arbitration would fail of its chief purpose; instead of being a substitute for litigation, it would merely be the beginning of litigation. Error of law renders the award void only when it would require the parties to commit a crime or otherwise to violate a positive mandate of the law.

7. Judicial intervention is ill-suited to the special characteristics of the arbitration process in labor disputes.

8. Maximum deference is owed to the arbitrator's decision, and the standard of review is among the narrowest known to law.

9. Once an arbitration award is entered, the finality that courts should afford the arbitration process weighs heavily in favor of the award, and courts must exercise great caution when asked to set aside an award. Moreover, because a primary purpose behind arbitration agreements is to avoid the expense and delay of court proceedings,it is well settled that judicial review of an arbitration award is very narrowly limited.

10. Where a defamatory statement is made in a situation where there is a qualified privilege the injured party has the burden of proving not only that the statements were false, but also that the statements were made with actual malice-with actual evil-mindedness or specific intent to injure.

11. Arbitrators are under no requirement to explain the award. When an arbitration panel does not give its reasons for the award, determining manifest disregard becomes nearly impossible.

12. A party making a claim based on manifest disregard shoulders a heavy burden. An arbitration panel's interpretation of the law will not be reversed unless there is a clear showing that the panel understood the law and chose to ignore it. A court's belief that the law has been misapplied does not justify vacation of the arbitral award.

13. K.S.A. 17-12a507 reads: “A broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative is not liable to another broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative for defamation relating to a statement that is contained in a record required by the administrator, or designee of the administrator, the securities and exchange commission, or a self-regulatory organization, unless the person knew, or should have known at the time that the statement was made, that it was false in a material respect or the person acted in reckless disregard of the statement's truth or falsity.”

14. The factors to be considered in determining an appropriate sanction under K.S.A. 60-211 are enumerated as follows: (1) whether the improper conduct was willful or negligent; (2) whether it was part of a pattern of activity or an isolated event; (3) whether it infected the entire pleading or only one particular count or defense; (4) whether the person has engaged in similar conduct in other litigation; (5) whether it was intended to injure; (6) what effect it had on the litigation process in time or expense; (7) whether the responsible person is trained in the law; (8) what amount, given the financial resources of the responsible person, is needed to deter that person from repetition in the same case; and (9) what amount is needed to deter similar activity by other litigants.

Laura L. McConwell and Edward A. McConwell, of McConwell Law Offices, of Mission, for the appellant.

Jeffrey S. Kruske, of Law Office of Jeffrey S. Kruske, P.A., of Overland Park, for the appellee.

Before HILL, P.J., PIERRON and LEBEN, JJ.

PIERRON, J.

In this employment termination case, Perkins, Smart & Boyd, Inc., (PSB) appeals the district court's decision to affirm an arbitration award entered in favor of Jack W. Moreland. PSB argues the court erred in denying a motion to vacate the arbitration award because the arbitration panel manifestly disregarded or willfully ignored controlling Kansas law. PSB also argues the court erred in granting sanctions and attorney fees in favor of Moreland. We vacate the sanctions but affirm the award.

For the most part, the parties do not dispute the controlling facts in this case. Rather, the issues involve questions of law and application of the law by the arbitration panel.

In October 2006, Moreland worked for PSB, an investment firm. PSB terminated Moreland upon allegations that he forged the names of his wife, son, and daughter on a letter of instruction to a mutual fund company in order to redeem fund shares from a trust set up for their benefit.

Both Moreland and PSB were subject to the rules and regulations of the Financial Industry Regulatory Authority (FINRA). Upon his termination, PSB was required to submit a Form U-5 to FINRA indicating the reasons for termination. PSB filed the Form U-5 on October 27, 2006. On the Form U-5, PSB gave the following reason for Moreland's termination:

“Mr. Moreland had a notary public notarize signatures of his wife, son and daughter that he had forged. This is conduct that is inconsistent with standards of this firm. The document that he signed was a letter to a mutual fund redeeming fund shares from a trust that was set up by his deceased mother-in-law for the benefit of Mr. Moreland and [his] children.”

Moreland was outraged with the allegation of forgery and immediately voiced his concerns to PSB. Mrs. Moreland and her children told PSB they had in fact signed the letter and confirmed this in affidavits filed in November 2006. On October 27, 2006, and November 1, 2006, F. Scott Perkins, president/CEO of PSB, entered Registration Comments with FINRA stating respectively: “I incorrectly stated in my comments that Mr. Moreland's deceased set up a trust for ‘Mr. Moreland and his children’. It should have said ‘for Mr. Moreland's wife and children.’ ” PSB also wrote: “I had put that Mr. Moreland was permitted to resign. The reasons listed are not true. There was no forgery involved.”

On April 24, 2007, Moreland filed a claim with National Association of Securities Dealers (NASD), now FINRA, alleging that as a result of the statements made in PSB's Form U-5, he had been turned down for employment by multiple insurance companies and brokerage firms. Moreland stated the signatures on the letter were not forged. But he had persuaded/asked the notary public to notarize the letter without the signatories present. Moreland alleged claims of defamation, violation of the Kansas Uniform Trade Practices Act, tortious interference with business expectancy, and false light/invasion of privacy. Moreland requested no less than $100,000 in damages, expungement of the statement,...