Rodney Schatt v. Aventura Limousine & Transportation Service, Inc. ( 2015 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-11549
________________________
D.C. Docket No. 1:10-cv-22353-MGC
RODNEY SCHATT,
individually and on behalf of all
persons similarly situated,
Plaintiff-Appellant,
versus
AVENTURA LIMOUSINE & TRANSPORTATION
SERVICE, INC.,
agent of
d/b/a/ Aventura Limousine and Aventura
Worldwide,
SCOTT TINKLER,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(March 16, 2015)
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Before HULL and DUBINA, Circuit Judges, and BOWEN, * District Judge.
PER CURIAM:
Plaintiff Rodney Schatt, a limousine driver, appeals the vacatur of an interim
arbitral award secured against his former employer. After careful review, we hold
that the district court was without jurisdiction to vacate the interim award. 1
I. BACKGROUND
On July 29, 2010, plaintiff Rodney Schatt filed an amended complaint
against defendants Aventura Limousine & Transportation Service, Inc., and Scott
Tinkler (collectively, “Aventura”). Schatt’s suit claims he and others were
misclassified as independent contractors and denied overtime pay by Aventura in
violation of the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq.
A. Compelling Arbitation
On August 30, 2010, defendant Aventura filed a motion to compel
arbitration and stay proceedings until completion of arbitration or, in the
alternative, to dismiss the action. The parties had previously executed an
agreement stating:
The parties agree that any dispute, claim, or controversy
arising out of or relating to this Agreement, the breach,
*
Honorable Dudley H. Bowen, Jr., United States District Judge for the Southern District
of Georgia, sitting by designation.
1
Although originally scheduled for oral argument, this appeal was removed from the oral
argument calendar by unanimous agreement of the panel. See 11th Cir. R. 34-3(f).
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termination, enforcement, or validity thereof, or any
other matter regarding the legal relationship between
[Aventura], [Schatt], or its employees, including the
determination of the scope or applicability of this
agreement to arbitrate, shall be determined by a single
arbitrator in proceedings administered by the American
Arbitration Association, pursuant to its Commercial
Arbitration Rules.
Aventura argued then that the district court “ha[d] no jurisdiction to determine the
scope of the issues subject to arbitration, in that the parties also have agreed that
both the applicability and the scope of the arbitration agreement [we]re to be
determined by an arbitrator.”
On November 30, 2010, Aventura prevailed on this argument. District
Court Judge Marcia Cooke granted Aventura’s motion to compel arbitration and
stayed the litigation, ordering the clerk to close the case and denying any pending
motions as moot.
The dispute then proceeded to arbitration before an American Arbitration
Association arbitrator.
B. New Counsel and the Arbitral Hearing
In October 2011, Schatt hired new counsel, attorneys Richard Celler and
Stacey Schulman of the firm Morgan & Morgan, P.A., to represent him in the
arbitration. Celler and Schulman at that time also represented other plaintiffs in
related FLSA actions against Aventura.
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From January 16 through January 18, 2012, arbitrator Sheila Cesarano
conducted a three-day hearing, which both parties and the district court termed the
“final hearing” or “final arbitration hearing.” The hearing addressed the central
dispute as to liability, whether Schatt was an employee as defined by the FLSA
rather than an independent contractor as Aventura argued. Following the hearing,
Cesarano required each party to submit proposed findings of fact and conclusions
of law along with final briefs by February 28, 2012.
C. The Motion to Disqualify
On February 24, 2012, defendant Aventura filed a motion in the district
court to disqualify Morgan & Morgan and its lawyers as well as a motion to stay
the arbitration pending resolution of the motion to disqualify. Specifically,
Aventura alleged that Richard Celler violated several of the Florida Bar Rules of
Professional Conduct in his representation of Schatt and other plaintiffs in their
FLSA claims against Aventura. In addition to an array of unprofessional and
hostile behavior, Celler allegedly engaged in ex parte communications with the
defendant designed to undermine defense counsel.
D. The Interim Award on Liability
On March 28, 2012, while the disqualification motions were pending, the
arbitrator issued the “Interim Award on Liability.” The arbitrator found for
plaintiff Schatt, determining: (1) “as a matter of law, that [Schatt] was an employee
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as defined by the FLSA,” rather than an independent contractor, and (2) that Schatt
“should have been paid overtime for hours worked over forty (40) hours in a
workweek.”2
Immediately following this finding the arbitrator addressed the issue of
damages. The Interim Award stated: “[b]ecause the issue of liability was bifurcated
from the issue of damages, I will set another hearing via separate Order, as to
damages, if necessary, as discussed below.” (emphasis added). Further explaining
this, the arbitrator determined that “[t]he amount of wages owed [Schatt] as well as
the amount of liquidated damages and reasonable attorneys’ fees and costs shall be
determined at a separate hearing . . . absent the parties agreeing to the amounts in
question.” The arbitrator “urged [the parties] to confer regarding damages to avoid
the necessity of a hearing” and concluded by stating that the Interim Award would
“remain in full force and effect until such time as a final Award is rendered.”
E. The Disqualification Dispute
On April 10, 2012, the district court granted defendant Aventura’s motion to
stay the arbitration pending resolution of the disqualification motion. Given Celler
2
Aventura filed a motion with the arbitrator to stay the arbitration proceedings. On or
about February 27, 2014, the arbitrator denied this motion for a stay, noting that “the briefing
schedule in this matter will remain as is” and that as no court order had then stayed the
arbitration, the arbitrator would “continue with administration.” Importantly, post-hearing briefs
were due February 28, 2012, the following day. On March 8, 2012, the arbitrator confirmed to
the parties that the hearing was concluded, the arbitral record was closed, and that the arbitrator
would render the award on liability by March 30, 2012.
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and Morgan & Morgan’s representation of other plaintiffs in similar actions,
Aventura filed similar motions in those cases.
On April 11, 2012, Aventura filed a motion to consolidate its
disqualification motion in this case with a nearly identical motion in Robson
Coelho v. Aventura Limousine & Transportation Service, Inc., Case No. 1:10-cv-
23228-MGC (S.D. Fla.), also before District Court Judge Cooke. Both the
disqualification and consolidation motions were referred to a magistrate judge.
On April 12, 2012, the magistrate judge granted the consolidation motion
but deferred ruling on the disqualification motion pending the resolution of yet
another related disqualification motion, this one in Bedoya v. Aventura Limousine
& Transportation Service, Inc., 861 F. Supp. 2d 1346 (S.D. Fla. 2012), before
District Court Judge Cecilia Altonaga.
In Bedoya, following several evidentiary hearings, District Court Judge
Altonaga ruled that the gravity of the professional misconduct warranted
disqualification of Celler, Schulman, and the Morgan & Morgan firm representing
plaintiff Bedoya in that action. Id. at 1373. Specifically, Judge Altonaga found
that: (1) Celler’s ex parte communication with defendant Scott Tinkler about
defense counsel compromised defendants’ attorney-client relationship and affected
the proceedings in Bedoya; (2) Morgan & Morgan’s ex parte communication with,
and securing of an affidavit from, Michael Goetz (who had an employment
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relationship with Aventura) was both improper and went to “an issue central to”
the Bedoya case; and (3) that Celler’s lack of professionalism as evidenced by a
variety of inappropriate and hostile behaviors also worked to compromise the
Bedoya case. Id. at 1356-58, 1370-71.
On May 16, 2012, District Court Judge Altonaga granted the motion to
disqualify in Bedoya. Id. Because Judge Altonaga was not presented with any
legal question beyond disqualification in Bedoya, she did not comment on the
effect of such disqualification, either in the Bedoya action or, critically, in this
case.
F. Withdrawal and New Counsel
On May 21, 2012, citing Judge Altonaga’s order, Stacey Schulman, on
behalf of herself and Morgan & Morgan, filed a motion to withdraw as counsel for
plaintiff Schatt in this action. Though not explicitly requesting it, the motion to
withdraw, in a footnote, indicated that “the stay [of arbitration] may no longer be
necessary” given counsel’s withdrawal.
On the same day, Aventura responded in partial opposition to Schulman’s
motion to withdraw to address the stay of arbitration. Aventura “vehemently
oppose[d] any lifting of the stay” and argued that for the case to continue at that
time would be “ludicrous.”
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On May 31, 2012, new counsel Brian Lerner filed a notice of appearance on
behalf of plaintiff Schatt.
G. Motion to Lift the Stay of Arbitration
On June 8, 2012, attorney Lerner filed a motion to lift the stay of the
arbitration on behalf of plaintiff Schatt. The motion argued that “the stay of
arbitration should be lifted in conjunction with the Court granting the pending
motion to withdraw by Morgan & Morgan, with any remaining issues to be
litigated addressed by the arbitrator.” The motion further acknowledged
Aventura’s opposition to lifting of the stay, but argued that any issues arising from
Morgan & Morgan’s representation of Schatt were “for the arbitrator to decide”
and that Aventura’s arguments to the contrary were merely an attempt “to unwind
the arbitration.”
On the same day, Aventura filed a response, arguing that lifting of the stay
would be inappropriate given the attorney misconduct that gave rise to the
withdrawal. Aventura argued: “By seeking to continue the arbitration proceedings
herein, and thus take advantage of the Interim Award, Plaintiff is indeed
attempting to profit from his counsel’s misconduct.”
On June 9, 2012, Schatt’s new counsel Lerner filed a reply.
H. Motion to Vacate the Interim Award of Liability
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On June 18, 2012, Aventura filed a motion for dismissal of the action with
prejudice or, in the alternative, for vacatur of the Interim Award. The motion also
sought attorney’s fees as a sanction for the earlier misconduct. In sum, Aventura
“maintain[ed] that by virtue of the all-consuming acts of attorney misconduct that
tainted the arbitration, the Interim Award cannot be permitted to stand, and
Plaintiff may not otherwise profit by virtue of the misconduct that already has
caused Defendants to suffer greatly.” Relevant to this appeal, Aventura wrote:
In the instant case, there already is an “Interim Award”
that has been rendered by the arbitrator. To the extent
that award is deemed to be a “final” award for purposes
of the Federal Arbitration Act, the law recognizes that
even a “final” award may be set aside by a district court.
In addition, Aventura argued that, if vacatur of the Interim Award were to be
granted, the matter should be reassigned to “a different arbitrator than that already
involved because to remand to the same arbitrator would preserve an advantage in
favor of Plaintiff that would just be unfair.”
On June 21, 2012, the magistrate judge, after a hearing on the motion to
withdraw, issued an order “adopt[ing] the findings of fact and conclusions of law
contained in Judge Altonaga’s order in Bedoya,” granting Schulman and Morgan
& Morgan’s motion to withdraw as plaintiff Schatt’s counsel, and denying as moot
Aventura’s motion to disqualify counsel. The magistrate judge’s order did not
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address issues raised by either plaintiff Schatt’s motion to lift the stay of arbitration
or by defendant Aventura’s motion to dismiss or vacate the Interim Award.
On July 5, 2012, Schatt filed his response to Aventura’s motion. In his
response, he argued that, in line with the arbitration agreement, the issues raised by
Aventura’s motion were “subject to determination by the arbitrator” and that, as a
result, Aventura’s motion was “not properly before” the district court.
Further, plaintiff Schatt argued that defendant Aventura’s motion for vacatur
of the Interim Award could not be decided by the district court because the Federal
Arbitration Act (the “FAA”) allows review of “final arbitration awards only, but
not of interim or partial rulings.” With respect to the jurisdiction of the district
court to vacate the Interim Award, Schatt characterized Aventura’s motion as an
improper interlocutory appeal of a non-final award.
On July 19, 2012, Aventura filed its reply. Regarding the finality of the
Interim Award, Aventura argued that its motion for vacatur was procedurally
proper because “the ‘Interim Award’ issued by the arbitrator [was], in fact, a ‘final’
award and, therefore, properly subject to a motion to vacate.” Stating that “titles
do not control,” Aventura maintained that because (1) only the “subsidiary matter
of damages” remained to be determined and (2) “there [was] no claim or defense
left to try,” the Interim Award should be read as final.
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On June 25, 2013, District Court Judge Cooke held a hearing on plaintiff
Schatt’s motion to lift the stay of arbitration and on defendant Aventura’s motion
to vacate the arbitral award.
I. The District Court Order
On April 8, 2014, twenty-two months after Schatt sought to lift the stay of
arbitration and Aventura sought to dismiss the action or vacate the arbitral award,
the district court entered an omnibus order. The district court denied Schatt’s
motion to lift the stay and granted in part and denied in part Aventura’s motion to
dismiss or vacate. The district court denied the motion to dismiss the case, granted
the vacatur motion, ordered the Interim Award vacated, and directed the parties to
a new arbitration before a new arbitrator.
In analyzing the vacatur motion, the district court found that “[t]he Interim
Award at issue here [was] sufficiently ‘final’ for review because the arbitrator
resolved the issue of liability, leaving only the amount of damages for a later
determination.” The district court further found that “[s]uch calculations do not
prevent the award from being set aside under Sections 10 and 12 of the FAA.”
After establishing, in its view, the authority to act on the vacatur motion, the
district court found that the Interim Award fell within the statutory grounds for
vacatur of an arbitral award because it was “procured by corruption, fraud, or
undue means.” Adopting District Court Judge Altonaga’s findings in the Bedoya
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action, the district court found that the attorney misconduct in this action
sufficiently affected the action to undermine the fairness of the award rendered.
On the same day the omnibus order was issued, plaintiff Schatt filed notice
of this appeal.
II. STANDARD OF REVIEW
This Court reviews de novo the district court’s legal conclusions underlying
an order vacating an arbitration award while reviewing its findings of fact for clear
error. Offshore Marine Towing, Inc. v. MR23, 412 F.3d 1254, 1255 (11th Cir.
2005). We also review de novo the district court’s determination of whether it has
subject matter jurisdiction. Gupta v. McGahey, 709 F.3d 1062, 1064-65 (11th Cir.
2013).
III. DISCUSSION
We begin, as we must, by determining whether the district court had
jurisdiction to vacate the Interim Award. It is beyond debate that the district court
had initial subject-matter jurisdiction over the FLSA action. It falls to us, however,
to determine if the Interim Award was a “final” arbitration award under the
meaning of the FAA. After careful review, we hold that it was not, and therefore
the district court was without jurisdiction to vacate the Interim Award.
Defendant Aventura, the appellee here, declined to file a responsive brief in
this appeal, instead “relying solely on the reasoning of the district court order
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below as well as the findings by the district court in Bedoya . . . .” Plaintiff Schatt,
in his opening brief, advances arguments to which Aventura attempts no response.
Although we decide the question of the district court’s jurisdiction against the
backdrop of our prior precedent, the wisdom of our sister circuits, and with a
fidelity to the language, structure, and purpose of the FAA, we note that the
appellee here could not have been less helpful in accomplishing this task. See
Lansdale v. Air Line Pilots Ass’n Int’l, 430 F.2d 1341, 1342 (5th Cir. 1970)
(“Appellee did not file a brief so we are without the benefit of argument to support
the district court’s position.”);3 United States v. Varmado, 342 F. App’x 437, 440
(11th Cir. 2009) (“The [appellee] did not file a brief in this appeal, so we can only
guess what the [appellee] thinks about that defense at this point in the
proceedings.”).
A. The Language of the FAA
The validity of an arbitration agreement is generally governed by the FAA, 9
U.S.C. § 1 et seq., enacted in 1925 to reverse the longstanding judicial hostility
toward arbitration. Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367
(11th Cir. 2005). The FAA embodies a liberal federal policy favoring arbitration
agreements. Id. (quotations omitted). The FAA’s clear purpose is “to relieve
3
Although we do not here cite a holding, this Court adopted as binding precedent all Fifth
Circuit decisions prior to October 1, 1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209
(11th Cir. 1981) (en banc).
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congestion in the courts and to provide parties with an alternative method for
dispute resolution that is speedier and less costly than litigation.” Id. (alterations
adopted).
Section 10 of the FAA allows the district court to vacate an arbitral award
under a set of statutorily-prescribed circumstances. Specifically, § 10 reads:
(a) In any of the following cases the United States court
in and for the district wherein the award was made may
make an order vacating the award upon the application of
any party to the arbitration—
(1) where the award was procured by corruption, fraud,
or undue means;
(2) where there was evident partiality or corruption in the
arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior
by which the rights of any party have been prejudiced; or
(4) 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.
9 U.S.C. § 10.
Courts interpreting this statutory provision commonly understand this to
mean that the FAA allows review of final arbitral awards only, but not of interim
or partial rulings. See Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603,
605 (5th Cir. 1995) (“By its own terms, § 10 [of the FAA] authorizes court action
only after a final award is made by the arbitrator.”); Michaels v. Mariforum
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Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980) (holding that § 10 “has no
application to an interim award that the arbitrators did not intend to be their final
determination on the issues submitted to them”). This limited review is consistent
with the long-held principle that review of arbitral awards is “among the narrowest
known to the law.” Del Casal v. Eastern Airlines, Inc., 634 F.2d 295, 298 (5th Cir.
1981).
B. As Applied to This Case
Here, the Interim Award on Liability clearly established that the arbitrator’s
work was not complete. The order itself states that a separate hearing would be
required if the parties failed to agree on backpay, liquidated damages, and
attorney’s fees and costs.
As plaintiff Schatt argues, the issue of backpay, in particular, demonstrates
that the Interim Award cannot be viewed as final. An arbitral hearing on damages
is necessary to determine which of Schatt’s hours worked are compensable under
the FLSA. The calculation of damages, to be set for a separate hearing, was
necessary to render the arbitral result final. See Savers Prop. & Cas. Ins. Co. v.
Nat'l Union Fire Ins. Co. of Pittsburg, Pa., 748 F.3d 708, 719 (6th Cir. 2014)
(“Here, the arbitration panel issued an interim award resolving only the matter of
liability; the panel retained jurisdiction to compute [claimant’s] damages. Under
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these circumstances, the arbitration was not complete because there was no ‘final’
award.”).
Further, the cases cited by the district court do not support its ultimate
conclusion. The district court’s order cited several cases where the only issue
remaining to be determined was attorney’s fees. See, e.g., In re Rollins, Inc., 552 F.
Supp. 2d 1318, 1324 (M.D. Fla. 2004) (award “disposed of all of the Respondent’s
Counts, Petitioners’ Counterclaim, and awarded damages” with the only issue
remaining being attorney’s fees); Cont’l Cas. Co. v. Staffing Concepts, Inc., No.
8:09-CV-02036-T-23, 2011 WL 7459781, at *4 (M.D. Fla. Dec. 20, 2011) report
and recommendation adopted, No. 8:09-CV-2036-T-23AEP, 2012 WL 715652
(M.D. Fla. Mar. 5, 2012) (award decided “all of the claims and defenses of both
parties” with only issue remaining being attorney’s fees); Nu-Best Franchising,
Inc. v. Motion Dynamics, Inc., No. 805CV507T27TGW, 2006 WL 1428319, at *4
(M.D. Fla. May 17, 2006) (award “determined liability, damages and entitlement
to attorneys’ fees and administrative expenses” with the only issue remaining being
amount of attorney’s fees). Unlike these cases, Schatt’s ongoing arbitration
involved far more remaining work than merely the calculation of attorney’s fees.
Because the Interim Award was not a final arbitral award, it was not
properly under review by the district court. As we decide that the district court
was without jurisdiction to vacate the Interim Award, we do not reach or comment
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upon the district court’s reasoning in deciding to vacate the award. We do stress,
however, that approaching five years have passed since plaintiff Schatt initially
filed his FLSA claim and accordingly we counsel against further delay.
IV. CONCLUSION
For the foregoing reasons, we reverse the district court’s vacatur of the
Interim Award and remand the case, directing the district court to lift the stay of
arbitration and to compel the parties to return to the prior arbitration. Nothing
herein precludes any party from making a motion to the prior arbitrator regarding
the effect, if any, of the disqualification of plaintiff’s counsel.
REVERSED and REMANDED.
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