Superadio Ltd. v. Winstar Radio Prod.

• Decision Date: 28 March 2006
• Citation: 446 Mass. 330,844 N.E.2d 246
• Parties: SUPERADIO LIMITED PARTNERSHIP v. WINSTAR RADIO PRODUCTIONS, LLC.<SMALL><SUP>1</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

844 N.E.2d 246

446 Mass. 330

SUPERADIO LIMITED PARTNERSHIP v. WINSTAR RADIO PRODUCTIONS, LLC.¹

Supreme Judicial Court of Massachusetts, Worcester.

Argued January 3, 2006.

Decided March 28, 2006.

John O. Mirick, Worcester (Jessica H. Munyon with him) for the plaintiff.

John D. Geelan, New York (Michelle M. Hansen with him) for the defendant.

The following submitted briefs for amici curiae:

Timothy P. Burke, Matthew C. Applebaum, Katherine W. Grearson, Richard A. Johnston, Mark C. Fleming, & James S. Goldman, Boston for Boston Bar Association.

Timothy P. Burke & Matthew C. Applebaum, Boston, for Securities Industry Association.

Andrew R. Grainger, Martin J. Newhouse, Boston, & Ben Robbins for New England Legal Foundation.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, SOSMAN, & CORDY, JJ.

GREANEY, J.

We granted further appellate review to decide whether the arbitration award in this case should be vacated. The losing party in the arbitration, Superadio Limited Partnership (Superadio), seeks that relief on two grounds: (1) that the attorney representing Walt "Baby" Love Productions, Inc. (Baby Love), who was licensed to practice law in New York, but not in Massachusetts, engaged in the unauthorized practice of law by representing Baby Love at the arbitration proceeding here; and (2) that the arbitration panel lacked authority to impose monetary sanctions for Superadio's violation of a discovery order. We affirm the judgment confirming the award.

The background of the case is as follows. In May, 1995, Superadio and Baby Love entered a radio network agreement (agreement) wherein Superadio became the exclusive advertising sales agent for an existing radio program and a proposed new radio program produced by Baby Love. Under the agreement, the net revenues collected from the sale of advertising airing on the radio programs were to be divided equally between Superadio and Baby Love. The agreement provided that it "shall be interpreted" under Massachusetts law and that "[a]ny dispute arising under the [a]greement, including but not limited to any dispute concerning payments due, shall be arbitrated under the rules of the American Arbitration Association [AAA] before a panel of the [AAA] sitting in Boston, Massachusetts." After an extension, the agreement terminated on December 31, 1998.

A few months later, Superadio filed a demand for arbitration, alleging that Baby Love had withheld approximately $150,000 in advertising revenues that should have been shared with Superadio. The disputed revenue allegedly derived from advertisements that had been booked by Superadio during the term of the agreement, but had not aired until after the agreement had terminated. Baby Love filed an answer and a counterclaim asserting that Superadio had violated the agreement by refusing to turn over advertising revenues that Superadio had collected on Baby Love's behalf for advertisements that had aired before the agreement terminated. Baby Love sought $841,239 in damages. Superadio agreed that Baby Love was entitled to approximately $75,000 of those revenues, but held the money to offset the amount which Superadio claimed it was owed.

The parties selected a panel of three arbitrators (panel). By agreement of the parties, the Commercial Arbitration Rules of the AAA (AAA rules), would govern the proceeding. The panel entered a partial summary judgment award, finding that Superadio had no right to offset, and ordering Superadio to pay the withheld amount to Baby Love.

The parties proceeded with discovery on the remaining claims to be arbitrated. Baby Love claimed that Superadio was not complying with its discovery requests and sought intervention from the panel. On August 21, 2000, the panel entered an order directing Superadio either to satisfy certain discovery requests "by September 22, 2000," or to pay Baby Love "$1,000 per day until Superadio is either in compliance or until the date of the [h]earing, whichever shall occur first." The parties were notified that the failure to produce discovery would result in the exclusion of such discovery as evidence at the arbitration hearing. Superadio did not comply with the discovery order and, on September 28, 2000, withdrew its demand for arbitration. Baby Love proceeded to arbitrate its counterclaim.

At some point in the proceedings, Superadio objected to the appearance of Baby Love's attorney, an attorney licensed to practice law in New York, but not in Massachusetts, contending that the attorney was engaged in the unauthorized practice of law. The attorney had not sought admission pro hac vice in Massachusetts, and Baby Love had not retained local counsel.

The panel conducted a hearing on the case in June, 2001, and did not permit either party to introduce documents or witnesses that it had not produced in response to a reasonable discovery request. On July 23, 2001, the panel entered its award. The panel concluded that Baby Love had supported its claim that Superadio had underreported the amount of advertising revenues owed. The panel, however, could not enter an award for contract damages because of Baby Love's inability to prove its damages, an inability attributable to Superadio's failure in discovery to produce documents relevant to the damages issue. The panel concluded that, under Rule 23(c) of the AAA rules (which we shall set forth later in this opinion), it had the authority to impose a sanction on Superadio for violating the panel's August 21, 2000, discovery order, and imposed a sanction in the amount of $271,000. The amount represented an assessment of $1,000 per day from September 23, 2000 (the day following the deadline for discovery compliance), to June 20, 2001 (the day that the arbitration hearing commenced). The panel noted that Superadio could have tolled the accrual of sanctions by producing the ordered discovery, which Superadio admitted was in its possession. The panel added to its award certain costs and prejudgment interest, amounts not in dispute, for a total award of $287,566.83. In addition, the panel noted that Superadio, by filing its demand for arbitration, had agreed to abide by the AAA rules, which permit nonlawyers to represent parties at an arbitration proceeding. In view of the applicable AAA rules, the panel rejected Superadio's argument that the representation of Baby Love by a licensed out-of-State attorney constituted the unauthorized practice of law.

Superadio filed a complaint in the Superior Court seeking to vacate the arbitration award. Baby Love filed an answer and a counterclaim requesting confirmation of the award. A Superior Court judge allowed Baby Love's motion and entered a judgment confirming the award. Superadio appealed, and the Appeals Court reversed, vacating that portion of the arbitration award that imposed sanctions ($271,000) on Superadio for its discovery violations. Superadio Ltd. Partnership v. Walt "Baby" Love Prods., Inc., 62 Mass. App.Ct. 546, 552, 818 N.E.2d 589 (2004). We granted Baby Love's application for further appellate review.

1. Consistent with policy strongly favoring arbitration, see Massachusetts Highway Dep't v. Perini Corp., 444 Mass. 366, 374, 828 N.E.2d 34 (2005), an arbitration award is subject to a narrow scope of review. School Comm. of Hanover v. Hanover Teachers Ass'n, 435 Mass. 736, 740, 761 N.E.2d 918 (2002). The bases for review are set forth in G.L. c. 251, § 12. Judicial intervention is permitted where an award "was procured by corruption, fraud or other undue means," § 12(a)(1), or where the "arbitrators exceeded their powers," § 12(a)(3). "An arbitrator exceeds his authority by granting relief beyond the scope of the arbitration agreement ... by awarding relief beyond that to which the parties bound themselves... or by awarding relief prohibited by law" (citations omitted). Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 Mass. 1006, 1007, 553 N.E.2d 1284 (1990). "Arbitration, it is clear, may not `award relief of a nature which offends public policy or which directs or requires a result contrary to express statutory provision'. . . or otherwise transcends the limits of the contract of which the agreement to arbitrate is but a part." Id., quoting Lawrence v. Falzarano, 380 Mass. 18, 28, 402 N.E.2d 1017 (1980).

2. We first take up Superadio's argument that the arbitration award was procured by undue means, see G.L. c. 251, § 12(a)(1), because Baby Love's attorney, a New York attorney not licensed to practice law in Massachusetts, engaged in the unauthorized practice of law by representing Baby Love in the arbitration. As a general proposition, an attorney practicing law in Massachusetts must be licensed, or authorized, to practice law here. Whether representation of a party by an out-of-State licensed attorney at a Massachusetts arbitration proceeding constitutes the practice of law, is an issue of first impression.

Under the Massachusetts Rules of Professional Conduct, which became effective on January 1, 1998, well before the arbitration proceedings in this case had commenced, a lawyer "shall not ... practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction." Mass. R. Prof. C. 5.5, 426 Mass. 1410 (1998). This rule is supplemented by G.L. c. 221, § 46A, which provides:

"No individual, other than a member, in good standing, of the bar of this commonwealth shall practice law, or, by word, sign, letter, advertisement or otherwise, hold himself out as authorized, entitled, competent, qualified or able to practice law; provided, that a member of the bar, in good standing, of any other [S]tate may appear, by permission of the court, as attorney or counselor, in any case pending therein, if such other [S]tate grants like privileges to members of the bar, in good standing, of this commonwealth."

See DiLuzio v. United Elec., Radio & Mach. Workers, Local 274, 391 Mass. 211, 214-215, 461 N.E.2d 766 (1984) (...