Thi of N.M. at Vida Encantada, LLC v. Lovato

• Decision Date: 25 July 2017
• Docket Number: No. 16-2041,16-2041
• Citation: 864 F.3d 1080
• Parties: THI OF NEW MEXICO AT VIDA ENCANTADA, LLC, Plaintiff-Appellant, v. Mary Louise LOVATO, as personal representative for the wrongful death estate of Guadalupe Duran, deceased, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

864 F.3d 1080

THI OF NEW MEXICO AT VIDA ENCANTADA, LLC, Plaintiff-Appellant,

v.Mary Louise LOVATO, as personal representative for the wrongful death estate of Guadalupe Duran, deceased, Defendant-Appellee.

No. 16-2041

United States Court of Appeals, Tenth Circuit.

FILED July 25, 2017

Lori D. Proctor, Cooper & Scully, P.C., Houston, Texas, for Plaintiff-Appellant.

Jennifer J. Foote (Dusti D. Harvey with her on the brief), Harvey and Foote Law Firm, LLC, Albuquerque, New Mexico, for Defendant-Appellee.

Before HOLMES, PHILLIPS, and MORITZ, Circuit Judges.

PHILLIPS, Circuit Judge.

Under the Federal Arbitration Act (FAA), we may vacate an arbitrator's decision "only in very unusual circumstances." Oxford Health Plans LLC v. Sutter , ––– U.S. ––––, 133 S.Ct. 2064, 2068, 186 L.Ed.2d 113 (2013) (quoting First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 942, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ). "That limited judicial review ... ‘maintain[s] arbitration's essential virtue of resolving disputes straightaway.’ " Id. (alteration in original) (quoting Hall Street Assocs., L.L.C. v. Mattel, Inc. , 552 U.S. 576, 588, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008) ). Section 10(a) of the FAA delineates the four "very unusual circumstances" for vacating arbitration awards. Oxford Health Plans LLC , 133 S.Ct. at 2068 ; see 9 U.S.C. § 10(a). Here, we consider whether an arbitrator exceeded his authority under § 10(a)(4) and whether he manifestly disregarded the law in awarding certain costs and fees to the prevailing party. Under our restrictive standard of review, we conclude that the arbitrator did not exceed his authority or manifestly disregard the law. So we affirm.

I

1. Standard of Review

In assessing the district court's confirmation of the arbitration award, "we review legal questions de novo and factual findings for clear error." CEEG (Shanghai) Solar Sci. & Tech. Co. v. LUMOS LLC , 829 F.3d 1201, 1205 (10th Cir. 2016). "An error is clear ‘if the district court's findings lack factual support in the record or if, after reviewing all the evidence, we have a definite and firm conviction that the district court erred.’ " Id. at 1205-06 (quoting Middleton v. Stephenson , 749 F.3d 1197, 1201 (10th Cir. 2014) ).

Though "[w]e do not owe deference to the district court's legal conclusions," we "afford maximum deference to the arbitrators' decisions." Id . at 1206 (emphasis omitted). Our task is to assess whether the district court correctly followed the restrictive standard that governs judicial review of an arbitrator's award:

"[W]e must give extreme deference to the determination of the [arbitrator] for the standard of review of arbitral awards is among the narrowest known to law ." ARW Exploration Corp. v. Aguirre , 45 F.3d 1455, 1462 (10th Cir. 1995).... "By agreeing to arbitrate, a party trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration." Gilmer v. Interstate/Johnson Lane Corp. , 500 U.S. 20, 31, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991).

Brown v. Coleman Co. , 220 F.3d 1180, 1182 (10th Cir. 2000) (emphasis added). So our review is extremely limited. Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C. , 430 F.3d 1269, 1275 (10th Cir. 2005). In addition, we have emphasized that a court should exercise "great caution" when a party asks for an arbitration award to be set aside. Ormsbee Dev. Co. v. Grace , 668 F.2d 1140, 1147 (10th Cir. 1982).

The Supreme Court has emphasized that "only ... extraordinary circumstances" warrant vacatur of an arbitral award. San Juan Coal Co. v. Int'l Union of Operating Eng'rs, Local 953 , 672 F.3d 1198, 1201 (10th Cir. 2012) (citing Major League Baseball Players Ass'n v. Garvey , 532 U.S. 504, 509, 532 U.S. 1015, 509, 121 S.Ct. 1724, 149 L.Ed.2d 740 (2001) (per curiam)).The Court has also said that if "the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc. , 484 U.S. 29, 38, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987) ; Oxford Health Plans LLC , 133 S.Ct. at 2068 (describing "the sole question" for courts as "whether the arbitrator (even arguably) interpreted the parties' contract, not whether he got its meaning right or wrong"). Even so, "[t]he arbitrator may not ignore the plain language of the contract." Misco , 484 U.S. at 38, 108 S.Ct. 364.

In practice, courts "are ‘not authorized to reconsider the merits of an award even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract.’ " CEEG , 829 F.3d at 1206 (quoting Misco , 484 U.S. at 36, 108 S.Ct. 364 ); see also ARW Expl. Corp. , 45 F.3d at 1463 ("Even erroneous interpretations or applications of law will not be disturbed."). "The arbitrator's construction holds, however good, bad, or ugly." Oxford Health Plans LLC , 133 S.Ct. at 2071.

Any "less deference would risk ‘improperly substitut[ing] a judicial determination for the arbitrator's decision that the parties bargained for.’ " San Juan Coal Co. , 672 F.3d at 1201 (alteration in original) (quoting Major League Baseball Players Ass'n , 532 U.S. at 509, 532 U.S. at 509, 121 S.Ct. 1724 ). It would also create a system in which "arbitration would become ‘merely a prelude to a more cumbersome and time-consuming judicial review process.’ " Oxford Health Plans LLC , 133 S.Ct. at 2068 (quoting Hall Street Assocs. , 552 U.S. at 588, 128 S.Ct. 1396 ).

2. Grounds for Reversal

Alongside this highly deferential standard of review, the law sets a high hurdle for reversal of an arbitral award. Enforcing the "strong federal policy favoring arbitration," this court has required parties seeking to set aside an arbitration award to establish a statutory basis or a judicially created exception for doing so. Bowen v. Amoco Pipeline Co. , 254 F.3d 925, 932 (10th Cir. 2001) ; see Burlington N. & Santa Fe Ry. Co. v. Pub. Serv. Co. of Okla. , 636 F.3d 562, 567 (10th Cir. 2010). Aside from these "limited circumstances," § 9 of the FAA requires courts to confirm arbitration awards. Denver & Rio Grande W. R.R. Co. v. Union Pac. R.R. Co. , 119 F.3d 847, 849 (10th Cir. 1997) (citing 9 U.S.C. § 9 ).

Section 10(a) of the FAA, 9 U.S.C. § 10(a), delineates four statutory grounds for vacating arbitral awards—grounds that require very unusual circumstances. Oxford Health Plans LLC , 133 S.Ct. at 2068. The first three grounds encompass various types of "corruption, fraud, or undue means" and arbitrator misconduct. 9 U.S.C. § 10(a)(1)-(3). The fourth ground, which is the only ground that THI of New Mexico at Vida Encantada (THI) invokes, applies "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." Id. § 10(a)(4).

A party seeking relief under § 10(a)(4)"bears a heavy burden." Oxford Health Plans LLC , 133 S.Ct. at 2068. "[C]onvincing a court of an arbitrator's error—even his grave error—is not enough." Id. at 2070. "Because the parties ‘bargained for the arbitrator's construction of their agreement,’ an arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court's view of its (de)merits." Id. (quoting E. Associated Coal Corp. v. Mine Workers , 531 U.S. 57, 62, 121 S.Ct. 462, 148 L.Ed.2d 354 (2000) ). Thus, in considering whether the arbitrator exceeded his powers, we consider one question: whether the arbitrator arguably interpreted the parties' contract, regardless of whether that interpretation was correct. Id.

To supplement these statutory grounds, we have recognized a judicially created exception to the rule that even an erroneous interpretation or application of law by an arbitrator is not reversible. See Denver & Rio Grande W. R.R. , 119 F.3d at 849 (explaining that "a handful of judicially created reasons" to reverse an arbitrator's decision have emerged over the years). For instance, this court has held that "manifest disregard of the law"—which requires "willful inattentiveness to the governing law"—is subject to reversal. ARW Expl. Corp. , 45 F.3d at 1463 (quoting Jenkins v. Prudential–Bache Sec. Inc. , 847 F.2d 631, 634 (10th Cir. 1988) ). "It is not enough ... to show that the [arbitrator] committed an error—or even a serious error." Stolt-Nielsen S.A. v. Animalfeeds Int'l Corp. , 559 U.S. 662, 671, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). "To warrant setting aside an arbitration award based on manifest disregard of the law, ‘the record must show that the arbitrators knew the law and explicitly disregarded it.’ " Hollern v. Wachovia Secs., Inc. , 458 F.3d 1169, 1176 (10th Cir. 2006) (quoting Dominion Video Satellite , 430 F.3d at 1274 ).¹

II

With this framework in mind, we turn to the facts of this case. In May 2007, ninety-two-year-old Guadalupe Duran was admitted to THI of New Mexico at Vida Encantada, LLC, a nursing home in Las Vegas, New Mexico, to obtain nursing-home care. During her stay at THI, Ms. Duran fell several times. During one fall, she broke her femur and hip. She suffered a stroke soon after undergoing surgery for her injuries. Less than five months after admission, Ms. Duran died while in THI's care.

Before admitting Ms. Duran to THI, her daughter and personal representative, Mary Ann Atencio, executed on her behalf an Admission Agreement and an Arbitration Agreement. In the Arbitration Agreement, the parties agreed to submit to "arbitration, as provided by the National Arbitration Forum Code of Procedure or other such association," and to allow an arbitrator to resolve "any Dispute(s)" between them, including "any controversy or dispute ... arising out of or relating to" the Admission Agreement or "the provision of care or services to" Ms. Duran, and "all issues pertaining to the scope of" the Arbitration...