Raytheon Co. v. Computer Distributors, Inc.

• Decision Date: 08 April 1986
• Docket Number: Civ. A. No. 85-2836-W.
• Citation: 632 F. Supp. 553
• Parties: RAYTHEON COMPANY, Plaintiff, v. COMPUTER DISTRIBUTORS, INC., Hubco Data Products Corp., and Interactive Business Systems, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

632 F. Supp. 553

RAYTHEON COMPANY, Plaintiff, v. COMPUTER DISTRIBUTORS, INC., Hubco Data Products Corp., and Interactive Business Systems, Inc., Defendants.

Civ. A. No. 85-2836-W.

United States District Court, D. Massachusetts,

April 8, 1986.

Joseph D. Steinfield, Hill & Barlow, Boston, Mass., for plaintiff.

Richard W. Giauque, Giauque & Williams, Salt Lake City, Utah, Samual Hoar, Goodwin, Procter & Hoar, Boston, Mass., for defendants.

MEMORANDUM AND ORDER

WOLF, District Judge.

Plaintiff Raytheon Companies ("Raytheon") brought this action seeking to confirm an Arbitration Decision and Award entered on July 5, 1985 (the "Award"), awarding $1,415,448.97 plus interest to Raytheon for breach of contract and awarding defendant Computer Distributors, Inc. and related entities ("CDI") $900,000 in damages, pursuant to Massachusetts General Laws ch. 93A. CDI opposed confirmation and subsequently moved that the Award be vacated in part.

CDI does not contest the award of $1,415,448.97 to Raytheon. CDI does, however, contest on two grounds the award of damages in its favor under ch. 93A, which it regards as too low. First, CDI claims that the arbitrators did not, as required, reach a majority decision with respect to the amount of ch. 93A damages. Therefore, CDI asks that this aspect of the Award be vacated and the issue of ch. 93A damages be remanded to the arbitrators. Second, CDI claims that the arbitrators manifestly disregarded applicable law in finding they were not empowered to grant CDI attorneys fees under ch. 93A. Therefore, CDI asks that this finding be reversed and that the court either determine the amount of attorneys fees to be awarded or, alternatively, remand to the arbitrators the question of the amount of attorneys fees to be awarded.

For the reasons set forth below, each of CDI's requests is denied and the Award is confirmed.

I. Facts

In 1983, Raytheon, a Massachusetts computer manufacturer, settled a potential claim CDI, a computer sales company, allegedly had against Raytheon based on a failure to disclose defects in its products. As part of the settlement, Raytheon contracted to provide CDI with an exclusive distributorship of a new line of products. CDI received loans and inventory in conjunction with this agreement. Several months later, Raytheon decided to discontinue the sale of the products CDI expected to distribute. Pursuant to the provisions of its contract with Raytheon, CDI demanded arbitration under the Rules of the American Arbitration Association ("AAA") of all of the ensuing claims between the parties, including the Mass.Gen.Laws ch. 93A claim which generated the issues now presented to this court.

The AAA Rules under which the now disputed arbitration was conducted contained several provisions particularly pertinent to this case. Paragraph 28 states:

Whenever there is more than one Arbitrator, all decisions of the Arbitrators must be by at least a majority. The award must also be made by at least a majority unless the concurrence of all is expressly required by the arbitration agreement or by law.

Paragraph 42 provides:

The award shall be in writing and shall be signed either by the sole Arbitrator or by at least a majority if there be more than one. It shall be executed in the manner required by law.

Paragraph 47(c) states:

Parties to these Rules shall be deemed to have consented that judgment upon the arbitration award may be entered in any Federal or State Court having jurisdiction thereof.

Paragraph 53 provides:

The Arbitrator shall interpret and apply these Rules insofar as they relate to the Aribtrator's powers and duties. When there is more than one Arbitrator and a difference arises among them concerning the meaning or application of any such Rules, it shall be decided by a majority vote. If that is unobtainable, either an Arbitrator or a party may refer the question to the AAA for final decision. All other Rules shall be interpreted and applied by the AAA.

Appointed as arbitrators in this matter were Walter McLaughlin, the former Chief Justice of the Massachusetts Superior Court, Jacob Lewiton, another former Massachusetts judge, and Terry Segal, a Massachusetts attorney.

In their Joint Stipulations of Law and Statement of the Issues submitted to the arbitrators the parties agreed that, "Massachusetts law governs all claims raised by Claimant CDI and Respondent Raytheon in this arbitration proceeding." They also articulated ten separate issues for the arbitrators to decide. Two distinct but related questions for the arbitrators are implicated in this action. Presented as Issue 5 was the question:

5. Whether Raytheon violated Mass. G.L. ch. 93A, § 2 and § 11 by virtue of acts or omissions related to its decision announced on May 18, 1984 that Raytheon Data Systems would cease the manufacture, distribution, and sale of data processing and word processing products, and if so, whether it did so knowingly or wilfully as these terms are used in Mass.G.L. ch. 93A.

Presented as Issue 6 was the question:

6. If Raytheon is found liable to Claimant, whether Claimant has adequately established damages and, if so, the amount thereof.

After lengthy hearings, the arbitrators decided the case on July 5, 1985. On that date they signed and issued four documents captioned respectively, "Arbitrator Decision and Award," "Award of Arbitrator(s)," "Concurrence of Terry Phillip Segal," and "Concurrence and Dissent of Walter J. McLaughlin, Sr., Arbitrator." The Arbitrators' Decision and Award and the Award of Arbitrator(s) were signed by Judge Lewiton and Mr. Segal. Mr. Segal also signed his Concurrence. Judge McLaughlin signed his Concurrence and Dissent. The court finds that, as CDI at least initially conceded, the Award in this case consists of these four documents. See Memorandum of Points and Authorities in Support of Defendants' Motion to Vacate Arbitration Award, page 2, n. 1.

With regard to Issue 5, Judge Lewiton and Mr. Segal found that Raytheon violated Mass.Gen.Laws ch. 93A. Arbitrators' Decision and Award at 27; Concurrence of Terry Phillip Segal. Judge McLaughlin disagreed. Concurrence and Dissent of Walter H. McLaughlin, Sr., Arbitrator at 1 et seq.

With regard to Issue 6, Judges Lewiton and McLaughlin found that CDI was entitled to recover damages of $900,000 caused by Raytheon's violation of Mass.Gen.Laws ch. 93A. Arbitrators' Decision and Award at 30; Concurrence and Dissent of Walter H. McLaughlin, Sr., Arbitrator at 1. In his Concurrence, Mr. Segal stated that he believed CDI was entitled to recover damages in excess of $900,000 and, therefore, dissented from the award of $900,000 to CDI.

In addition, the arbitrators unanimously agreed that in view of the rationale of the Massachusetts Supreme Judicial Court's decision in Floors, Inc. v. B.G. Danis of New England, Inc., 380 Mass. 91, 401 N.E.2d 839 (1980), Mass.Gen.Laws ch. 93A did not authorize an award of attorneys fees by arbitrators. Arbitrators' Decision and Award at 31-32. Thus, CDI's request for attorneys fees was denied.

II. Discussion

It is evident that when the four documents comprising the Award in this case were signed and issued on July 5, 1985, the three arbitrators believed that they had appropriately decided all of the issues presented to them and that their task was complete. CDI now contends, however, that the Award is in excess of and contrary to the arbitrators' powers as well as incomplete, because: (1) the award of $900,000 damages was not made by a majority of the arbitrators as Judge McLaughlin, by virtue of his dissent concerning liability, could not properly participate in deciding the amount of damages and Judge Lewiton and Mr. Segal did not agree on an amount; (2) the document captioned "Award of Arbitrators" was not signed by a majority of arbitrators as required by the AAA rules; and (3) the decision that the arbitrators could not award attorneys fees for a violation of Mass.Gen.Laws ch. 93A was contrary to public policy and in manifest disregard of applicable law and the policies under the Federal Arbitration Act. The court finds each of these contentions to be without merit.

A. The Applicable Standard of Review

CDI seeks to have the Award in this case vacated pursuant to 9 U.S.C. § 10(d), which provides that a court may issue an order vacating an arbitrators' award, "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."

This court's role in reviewing the arbitrators' explicit and implicit decisions in this case is limited. The Court of Appeals for the First Circuit has plainly stated that:

A federal court is empowered to vacate an arbitrator's award only on the grounds specified in 9 U.S.C. § 10. As this court noted in Local Union No. 251, International Brotherhood of Teamsters v. Narragansett Improvement Co., 503 F.2d 309 (1st Cir.1974): "The courts are precluded from considering factual or legal issues which are by voluntary agreement made the subject of arbitration. Judicial intrusion is restricted to extraordinary situations indicating abuse of arbitral power or exercise beyond the jurisdiction of the arbitrator.

Mobil Oil v. Oil, Chemical and Atomic Workers International Union, 600 F.2d 322, 326 (1st Cir.1979). "Interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in federal courts, to judicial review for error in interpretation." Wilko v. Swan, 346 U.S. 427, 436-37, 74 S.Ct. 182, 187, 98 L.Ed. 168 (1953). This strict standard of review is essential to effectuate the purpose of the laws permitting arbitration as "an opportunity generally to secure prompt, economical, and adequate solutions of controversies through arbitration if the parties are willing to accept less certainty of legally correct adjustment." Id., 346 U.S. at 438, 74 S.Ct. at 188.

Further refining these concepts, the Court of Appeals for...