Piston v. Transamerica Capital ( 2020 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 21, 2020
_________________________________
Christopher M. Wolpert
Clerk of Court
ZANE PISTON,
Movant - Appellant,
v. No. 19-1123
(D.C. No. 1:18-CV-01793-RPM)
TRANSAMERICA CAPITAL, INC., (D. Colo.)
Respondent - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BRISCOE, MATHESON, and CARSON, Circuit Judges.
_________________________________
Zane Piston challenges an arbitration award that dismissed his claim against
Transamerica Capital, Inc. (TCI). The district court refused to vacate the award, and
we affirm its judgment.
I. Background
After losing his job with TCI, Mr. Piston filed an arbitration case with the
Financial Industry Regulatory Authority (FINRA), alleging that TCI incorrectly
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
described the reason for his termination. He contended his ability to secure
comparable employment was harmed as a result. In December 2017, the arbitration
panel first held an initial prehearing conference and then issued a scheduling order
which provided deadlines for the filing of discovery motions, optional prehearing
briefs, and witness lists. The scheduling order also notified the parties that the final
arbitration hearing was set for June 4-8, 2018.
On April 2, 2018, TCI moved to compel Mr. Piston to provide, among other
things, legible copies of documents. Mr. Piston did not respond to the motion within
the ten-day time frame for doing so. On April 18, Mr. Piston’s counsel asked the
panel not to rule on the motion until he responded, saying that he planned to respond
within one business day. Still without a response from Mr. Piston two weeks later,
on May 2, the panel granted TCI’s motion to compel, specified required actions, and
ordered Mr. Piston to “fully comply with this order by May 9, 2018.” Aplt. App. at
78.
Mr. Piston did not comply by May 9. And so on May 10, TCI moved to
sanction Mr. Piston for failing to comply with the May 2 order by precluding him
from presenting evidence at the hearing and by ordering attorney’s fees.
On May 15, 2018, with its May 10 sanctions motion still pending, TCI
proceeded to serve its witness list, arbitration brief and supplemental document
production—all in accordance with the scheduling order. Mr. Piston filed nothing.
On May 16, TCI filed another sanctions motion citing Mr. Piston’s failure to comply
with FINRA Rule 13514 and the scheduling order by not providing opposing counsel
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copies of all previously undisclosed documents that he intended to use at the hearing,
a witness list by May 15, and the documents required by the panel’s May 2 order.
Citing these failures, TCI’s May 16 sanctions motion asked the panel to dismiss Mr.
Piston’s claim, preclude the presentation of his evidence, and order attorney’s fees.
The next day, May 17, the panel issued an expedited briefing schedule to
address TCI’s May 16 motion, requiring Mr. Piston to respond by May 22 and not
permitting TCI to reply. Mr. Piston did not respond by May 22.
On May 25, the panel postponed the final arbitration hearing scheduled for
June 4-8, removed it from the calendar, set a telephonic hearing for June 4, and
assigned Mr. Piston the burden at the telephonic hearing to show good cause why
TCI’s sanction of dismissal should not be granted. Between May 31 and June 4, Mr.
Piston’s counsel filed several responses to TCI’s sanctions motions, a “witness list
and documents exchange,” and a response containing a statement of good cause. In
the statement of good cause, Mr. Piston’s counsel explained that he underwent dental
surgery on May 10, that he travelled to Europe from May 17 through May 24 to visit
his son who was studying abroad, and that his wife had been hospitalized for several
days after experiencing a “serious medical incident on or about May 19” which
required his presence at her bedside when he returned from Europe. Aplt. App. at
140.
The panel heard argument from the parties’ counsel at the June 4 hearing and
later issued its award. It found that Mr. Piston (1) did not show good cause for
failing to comply with discovery orders; (2) did not timely respond to efforts to set a
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conference on discovery matters; and (3) did not meet witness-list and exhibit
deadlines. The panel further found that these failures caused a last-minute delay of
the scheduled five-day June hearing, caused TCI to incur costs and fees preparing for
the hearing, and prejudiced TCI because it was prepared to conduct the hearing as
scheduled. It ultimately dismissed Mr. Piston’s claim “with prejudice as a sanction
due to the material and intentional failure to comply with prior orders of the Panel
despite its efforts to advise [Mr. Piston’s] counsel of the need to comply with FINRA
rules and deadlines.” Id. at 24.
The district court denied Mr. Piston’s motion to vacate the panel’s award.
II. Discussion
Mr. Piston argues on appeal that the arbitration panel exceeded its powers,
manifestly disregarded the law, committed misconduct, and denied him a
fundamentally fair hearing. He also contends that the district court did not
adequately address his arguments. Applying the narrow standard of review that
governs our review of arbitration awards, we conclude there is no basis for reversal.
A. Standard of Review
We review the district court’s factual findings for clear error and its legal
conclusions de novo. Mid Atl. Capital Corp. v. Bien, 956 F.3d 1182, 1189 (10th Cir.
2020). Although we give the district court’s legal conclusions no deference, we give
the arbitration panel’s decisions “maximum deference.” THI of N.M. at Vida
Encantada, LLC v. Lovato, 864 F.3d 1080, 1083 (10th Cir. 2017) (internal quotation
marks omitted). After all, “the standard of review of arbitral awards is among the
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narrowest known to the law.” ARW Expl. Corp. v. Aguirre, 45 F.3d 1455, 1462
(10th Cir. 1995) (internal quotation marks omitted). We therefore proceed with
“great caution” when a party asks us to vacate an arbitration award. Ormsbee Dev.
Co. v. Grace, 668 F.2d 1140, 1147 (10th Cir. 1982).
The Federal Arbitration Act (FAA) allows courts to “vacate an arbitrator’s
decision only in very unusual circumstances.” Oxford Health Plans LLC v. Sutter,
569 U.S. 564, 568 (2013) (internal quotation marks omitted). Those unusual
circumstances include when “the arbitrators exceeded their powers.”1 9 U.S.C.
§ 10(a)(4). A party seeking to show that an arbitration panel exceeded its powers
“bears a heavy burden.” Oxford, 569 U.S. at 569. Courts may not vacate an award
based only on a showing “that the panel committed an error—or even a serious
error.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010).
“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.” Oxford, 569 U.S. at 569 (internal
quotation marks omitted). “So the sole question for us is whether the arbitrator (even
1
The FAA also permits courts to vacate arbitration awards “where the
arbitrators were guilty of misconduct in refusing to postpone the hearing . . . or in
refusing to hear evidence pertinent and material to the controversy.” 9 U.S.C.
§ 10(a)(3). Mr. Piston asserts several times that the panel committed “misconduct.”
But we do not read his brief to invoke § 10(a)(3) for three reasons. First, he does not
allege that the panel refused to postpone a hearing or refused to hear “evidence
pertinent and material” to TCI’s sanctions motions. Second, his brief cites § 10(a)
only in the standard-of-review section. And third, he does not expressly allege that
we should vacate the award under § 10(a)(3).
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arguably) interpreted the parties’ contract, not whether he got its meaning right or
wrong.” Id.
B. FINRA Rule 13212
Many of Mr. Piston’s arguments hinge on FINRA Rule 13212(c), which allows
an arbitration panel to dismiss a claim “with prejudice as a sanction for material and
intentional failure to comply with an order of the panel if prior warnings or sanctions
have proven ineffective.” Mr. Piston asserts that he received neither a warning nor a
sanction before the panel dismissed his claim. By dismissing his claim without prior
warning or sanction, he continues, the panel exceeded its powers, manifestly
disregarded the law, committed misconduct, and denied him a fundamentally fair
hearing.
Rule 13212(c)’s meaning is a question of contract interpretation because the
parties’ agreement incorporated the FINRA Code Rules. See Mid Atl., 956 F.3d at
1207 (noting that the meaning of a FINRA Rule, incorporated by the parties’ contract
“is a question of contract interpretation”); FINRA Code, Rule 13101(b) (“When a
dispute is submitted to arbitration under the Code pursuant to an arbitration
agreement, the Code is incorporated by reference into the agreement.”).
C. The Panel did not Exceed its Powers
We have no trouble concluding that the panel arguably interpreted Rule
13212(c) in its rulings. First, TCI’s May 16 sanctions motion cited Rule 13212.
Second, the panel employed Rule 13212(c)’s language when it found that Mr.
Piston’s failures to comply with its orders were material and intentional. Third, the
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panel found that those failures occurred “despite its efforts to advise [Mr. Piston’s]
counsel of the need to comply with FINRA rules and deadlines.” Aplt. App. at 24.
This finding arguably aligns with Rule 13212(c)’s provision authorizing dismissal “if
prior warnings or sanctions have proven ineffective.” FINRA Code, Rule 13212(c).
And fourth, the panel’s award expressly purports to dismiss Mr. Piston’s claims
“[p]ursuant to the Code Rule 13212.” Aplt. App. at 24. For these reasons, we
conclude that the panel arguably applied Rule 13212(c), which is part of the parties’
contract. Mr. Piston has not supported his claim that the panel exceeded its powers
in applying the Rule. See Oxford, 569 U.S. at 569.
At its core, Mr. Piston’s argument alleges that the panel erroneously applied
Rule 13212(c) by dismissing his claims without prior warning or sanction. Perhaps
reasonable people could disagree about whether sufficient warning occurred under
Rule 13212(c) through the panel’s scheduling order, the panel’s order compelling
discovery, TCI’s sanctions motions, the panel’s order requiring Mr. Piston to show
good cause to avoid dismissal, or some combination of those things. But whether the
panel correctly interpreted Rule 13212(c) is beyond the scope of our review. So long
as the panel arguably applied the Rule—and it did—we may not disturb its award.
See Oxford, 569 U.S. at 569.
D. The Panel did not Manifestly Disregard the Law, Commit Misconduct, or Deny
Mr. Piston a Fundamentally Fair Hearing
Courts have “recognized a handful of judicially created reasons” for vacating
an arbitration award, including “violations of public policy, manifest disregard of the
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law, and denial of a fundamentally fair hearing.” Sheldon v. Vermonty, 269 F.3d
1202, 1206 (10th Cir. 2001) (internal quotation marks omitted). “But the Supreme
Court cast doubt on the vitality of those judicially created reasons in Hall Street
Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 . . . (2008).” Mid Atl., 956 F.3d at
1190 n.3. We need not decide whether any judicially created reasons to vacate an
award survive Hall Street because, even if they do, Mr. Piston has not shown that any
warrant reversal here.
Manifest disregard of the law means a “willful inattentiveness to the governing
law.” Bowen v. Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir. 2001) (internal
quotation marks omitted). This standard requires more than a panel’s error or
misunderstanding of the law; it requires that the record show the panel knew the law
and explicitly disregarded it. Id.Mr. Piston argues that the panel “must be charged with constructive, if not
actual,” knowledge of FINRA Rules. Aplt. Br. at 16. And by dismissing his claim
without “prior warnings or sanctions,” he continues, the panel manifestly disregarded
the law. Id. at 17. The same reasons that lead us to conclude that the panel did not
exceed its authority require us to reject Mr. Piston’s arguments that the panel
manifestly disregarded the law or committed misconduct when it dismissed his claim.
Far from showing that the panel disregarded Rule 13212, the panel’s award expressly
purports to apply it. Any error in the panel’s application of the Rule does not provide
us a basis to vacate the award. See Bowen, 254 F.3d at 932.
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Alleging further manifest disregard of the law and misconduct, Mr. Piston
challenges the panel’s findings that he failed to timely respond to efforts to set a pre-
hearing conference, that his counsel’s conduct caused a last-minute delay of the final
hearing, that his counsel failed to show “any justification for his conduct,” and that
his counsel’s noncompliance was intentional. But any errors in the panel’s factual
findings do not warrant vacating its award. See Denver & Rio Grande W. R.R. Co. v.
Union Pac. R.R. Co., 119 F.3d 847, 849 (10th Cir. 1997). Indeed, “the factual
findings of the arbitrator are insulated from judicial review.” Id.We must also reject Mr. Piston’s claim that the panel manifestly disregarded
the law when it found that he had not shown good cause to support denial of TCI’s
requested sanction. Mr. Piston’s assertion that the panel misapplied the good-cause
standard, even if true, cannot result in our reversal because he must do more than
“show that the panel committed an error—or even a serious error.” Stolt-Nielsen,
559 U.S. at 671. And the record refutes Mr. Piston’s argument that the panel
recognized that he established good cause and then required him to meet a more
demanding excusable-neglect standard. In the award, the panel expressly found that
that Mr. Piston failed to “demonstrate good cause for failing to comply with
discovery orders.” Aplt. App. at 24. Nothing about that finding conflicts with the
panel’s additional findings that Mr. Piston’s counsel failed to show “any justification
for his conduct or that it constituted excusable neglect.” Id.Nor has Mr. Piston shown that the panel deprived him of a fundamentally fair
hearing. He argues that the panel, without authority, substituted “a pre-hearing
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argument” for the hearing. Aplt. Br. at 24. But the panel did not substitute the June
4 argument for the final hearing. Instead, it postponed the final hearing and set a new
hearing to address TCI’s sanctions motions. And FINRA Rule 13601(a)(2) allows a
panel to postpone a hearing “in its own discretion.”
Mr. Piston cites Prudential Securities, Inc. v. Dalton, 929 F. Supp. 1411 (N.D.
Okla. 1996), to support his claim that the panel deprived him of a fundamentally fair
hearing. But Dalton is easily distinguished. The Dalton court concluded that the
arbitration panel in that case denied the claimant a fundamentally fair hearing by
dismissing his claim without giving him the opportunity to present evidence on the
merits when the complaint alleged facts that, if true, would warrant relief.
929 F. Supp. at 1417-18. Unlike the present case, Dalton did not involve dismissal
as a sanction for a counsel’s failure to comply with orders.
Mr. Piston has not shown that by dismissing his claim (as he sees it, without
prior warning or sanction), the panel deprived him of the arbitration he bargained
for—an arbitration conforming to FINRA Rules. By agreeing to arbitrate, “the
parties bargained for the arbitrator’s construction of their agreement.” Oxford,
569 U.S. at 569 (internal quotation marks omitted). As we have explained, the record
does not show that Mr. Piston received anything less.
E. The District Court Adequately Addressed Mr. Piston’s Arguments
Mr. Piston asserts that the district court did not adequately address his
arguments. He therefore argues that if we do not vacate the panel’s award, then we
should at least remand the case to the district court for a thorough analysis of his
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arguments. A district court’s findings and conclusions suffice “if they enable the
appellate court to conduct a proper review of the decision below.” Castaneda v. JBS
USA, LLC, 819 F.3d 1237, 1247 (10th Cir. 2016). In this case, the district court
concluded that dismissal was an appropriate sanction for the failures of Mr. Piston’s
counsel and that the panel did not commit misconduct, exceed its authority, or
manifestly disregard the law. The district court’s order provides us all we need to
conduct a proper review of its decision.
III. Conclusion
We affirm the district court’s judgment.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
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