Salt Lake Tribune v. Management Planning

• Decision Date: 30 November 2004
• Docket Number: No. 03-4259.,No. 03-4256.,03-4256.,03-4259.
• Citation: 390 F.3d 684
• Parties: SALT LAKE TRIBUNE PUBLISHING COMPANY, LLC, Plaintiff-Appellant, v. MANAGEMENT PLANNING, INC.; MediaNews Group, Inc.; Kearns-Tribune, LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

390 F.3d 684

SALT LAKE TRIBUNE PUBLISHING COMPANY, LLC, Plaintiff-Appellant, v. MANAGEMENT PLANNING, INC.; MediaNews Group, Inc.; Kearns-Tribune, LLC, Defendants-Appellees.

No. 03-4256.

No. 03-4259.

United States Court of Appeals, Tenth Circuit.

November 30, 2004.

COPYRIGHT MATERIAL OMITTED

Seth P. Waxman, Wilmer, Cutler & Pickering, LLP, Washington, D.C. (A. Stephen Hut, Jr., Patrick J. Carome, and David S. Cohen, Wilmer, Cutler & Pickering, LLP, Washington, D.C.; Gary F. Bendinger and Lisa R. Petersen, Bendinger, Crockett, Peterson Greenwood & Casey, Salt Lake City, UT, with him on the briefs) for Plaintiff-Appellant Salt Lake Tribune Publishing Company.

Kevin T. Baine, Williams & Connolly LLP, Washington, D.C. (Paul B. Gaffney and Suzanne H. Woods, Williams & Connolly LLP, Washington, D.C., and James S. Jardine, and Allan T. Brinkerhoff, Ray, Quinney & Nebeker, Salt Lake City, UT, with him on the briefs) for the Defendants-Appellees MediaNews Group Inc. and Kearns-Tribune, LLC.

Robert S. Clark, Parr Waddoups Brown Gee & Loveless, Salt Lake City, UT (Brian J. Ramriell and Bently J. Tolk, Parr Waddoups Brown Gee & Loveless, Salt Lake City, UT, with him on the briefs) for Defendant-Appellee Management Planning, Inc.

Before SEYMOUR, HENRY, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

What began as a straightforward transaction has escalated into a frustrating dispute, which the district court attempted to resolve by applying arbitration principles. At issue is whether a certain appraisal constituted an arbitration under the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. Finding that the appraisal was an arbitration, the district court granted the considerable deference owed to arbitrators' decisions and dismissed Salt Lake Tribune Publishing Company, LLC's ("SLTPC") claims against MediaNews Group, Inc. ("MediaNews") and Management Planning, Inc. ("MPI"). Because we conclude that the appraisal did not constitute an arbitration, we exercise jurisdiction pursuant to 28 U.S.C. § 1291 and REVERSE.

I

Shareholders of the Kearns-Tribune Corporation, which owned The Salt Lake Tribune newspaper, sold their company to Tele-Communications, Inc., which has now become MediaNews. Kearns-Tribune shareholders formed a new company, SLTPC, and, at the time of the sale, acquired an option to purchase the newspaper from MediaNews after five years ("Option Agreement"). Under the Option Agreement, the exercise price of the option equaled the "Fair Market Value" of the newspaper's assets.¹ If the parties could not agree on an exercise price, each side was to appoint an appraiser ("party appraisers") to assess the newspaper's Fair Market Value. If the party appraisers differed from each other by more than ten percent in their estimation of the newspaper's value, they would jointly select a third appraiser and the exercise price would equal the average of the two closest appraisal values reported by the three appraisers.²

In August 2002, SLTPC began negotiations with MediaNews to establish the exercise price. Unable to agree on a price, the parties each retained appraisers. MediaNews's appraiser issued a report appraising the Fair Market Value of the newspaper's assets at $380 million, which exceeded SLTPC's appraiser's evaluation of $218 million. Because the party appraisers differed by more than ten percent, they turned to the selection of a third appraiser. Following protracted negotiations, in which each side rejected the other's preferred candidates, the parties ultimately selected MPI. In a letter to the party appraisers, MPI agreed to appraise the Fair Market Value of the newspaper's assets and specified the method by which it would conduct the appraisal. MediaNews and SLTPC responded with a letter agreeing to retain MPI's services. In combination, MPI's letter to the party appraisers and SLTPC and MediaNews's response constitute the Appraisal Agreement. Pursuant to the Appraisal Agreement, and after conducting the necessary investigation and receiving comments from both parties, MPI issued its final report valuing the newspaper's assets at $331 million.

Claiming that MPI failed to produce its appraisal under the standards required by the Option Agreement, SLTPC sued MediaNews and MPI in district court seeking, inter alia, (1) a declaration that MPI's appraisal may not be used to calculate the exercise price, (2) a ruling imposing a new appraisal process using all new appraisals, a new valuation date, and a new selection of a third appraiser, (3) compensatory damages from MPI based on its alleged breach of contract, (4) compensatory and punitive damages based on MPI's alleged breach of fiduciary duty, and (5) if MPI's appraisal were deemed an "arbitration award," an order vacating such award. In an order denying, in part, motions to dismiss filed by MediaNews and MPI, the court below concluded that MPI's appraisal constituted an arbitration within the meaning of the FAA, which allowed SLTPC to file a motion to vacate to overturn MPI's "arbitration award." Following that order, SLTPC filed a motion to vacate under the FAA, which the district court denied. At this juncture, the court granted the defendants' motion to dismiss.

In its final order, the court determined that its prior orders concluding that MPI's appraisal was an arbitration, not vacated under the FAA, resolved SLTPC's first, second, and fifth claims in favor of MediaNews. Accordingly, the court dismissed all of SLTPC's claims against MediaNews. In dismissing SLTPC's claims against MPI, the court concluded that MPI acted as an arbitrator and therefore was entitled to immunity from civil liability for all acts performed in its arbitral capacity. SLTPC appealed.

II

We review a district court's dismissal under Fed.R.Civ.P. 12(b)(6) de novo, accepting the well-pleaded allegations of the complaint as true and construing them in the light most favorable to the plaintiff. See Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir.2003).

A

We begin by analyzing whether MPI's appraisal constituted an arbitration within the meaning of the FAA. Because Congress did not define "arbitration" in the FAA, we must first decide which source of law provides that definition. Relying on the Option Agreement's choice-of-law provision electing Delaware law, the district court turned to Delaware law to define "arbitration." On appeal, SLTPC urges us to apply federal law. Our review of the authorities leads us to conclude that SLTPC's position is correct and that federal law supplies the standard by which we must determine whether MPI's appraisal was an arbitration.

In the absence of clear evidence that Congress intended state law to define "arbitration," we must assume that federal law provides the definition. The meaning that the law attaches to the term "arbitration" establishes the scope and force of the FAA. Unless Congress plainly intended the various states' laws to define "arbitration," and to therefore regulate the FAA's application within their borders, we will look to federal law for the definition. See Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 43, 109 S.Ct. 1597, 104 L.Ed.2d 29 (1989) ("We start ... with the general assumption that in the absence of a plain indication to the contrary, Congress when it enacts a statute is not making the application of the federal act dependent on state law.") (internal citations omitted). Because federal law applies nationally, we assume that Congress desires national uniformity in the application of its laws. See, e.g., Jerome v. United States, 318 U.S. 101, 104, 63 S.Ct. 483, 87 L.Ed. 640 (1943). Those cases where Congress intended state law to define a statutory term have usually been those where Congress clearly did not intend uniformity. See Holyfield, 490 U.S. at 43-44, 109 S.Ct. 1597.

Neither the language nor the legislative history of the FAA demonstrate that Congress plainly intended state law to define the FAA's central term. Not only does the FAA lack a plain indication that state law should govern, it is silent as to what law defines "arbitration." We cannot, on the basis of congressional muteness, conclude that state law should define the FAA's pivotal word.

Were we to hold that state law guides our determination, we would empower states to define arbitration as they choose, thus limiting the FAA's utility. This we decline to do. Congress passed the FAA to ensure that state law would not undermine arbitration agreements. Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984) ("Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements."). In passing the FAA to curb state attempts to eliminate arbitration provisions, Congress likely did not delegate to the states the power to define arbitration in a way that would circumscribe its availability. "It should not be necessary, but it definitely is, to stress that whether a given dispute resolution procedure is arbitration within the meaning of the FAA is a question of federal, not state, law." I Ian R. MacNeil, et. al., Federal Arbitration Law § 2.1.2A (1999 Supp.).

In concluding that state law should define "arbitration," the district court relied on decisions by the Ninth and Fifth Circuits. In Wasyl, Inc. v. First Boston Corp., 813 F.2d 1579, 1582 (9th Cir.1987), the Ninth Circuit defined arbitration by reference to California law. Although a subsequent panel faced with a similar question felt constrained to follow Wasyl, all three judges concurred specially to "question the vitality of Wasyl...." Portland General Electric Co. v. United States Bank Trust Nat'l Assoc., 218 F.3d 1085, 1091 (9th Cir.2000) (McKeown, J., concurring). The judges declared it inappropriate to "look to state law to define a term in a federal statute on a subject as to which Congress has declared the need for national uniformity," and that the case before it illustrated that ...