CPR Management SA v. Devon Park Bioventures LP ( 2021 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
Nos. 20-2343, 20-2344
______________
CPR MANAGEMENT, S.A.,
v.
DEVON PARK BIOVENTURES, L.P.;
DEVON PARK ASSOCIATES, L.P.,
Appellants in 20-2344
Deutsche Bank A.G.,
Appellant in 2343
______________
Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-18-cv-01973)
District Judge: Hon. Cynthia M. Rufe
______________
Argued October 14, 2021
______________
Before: SHWARTZ, NYGAARD, and FISHER, Circuit
Judges.
(Filed: November 22, 2021)
K. Tyler O’Connell
Morris James
500 Delaware Avenue
Suite 1500
Wilmington, DE 19801
Michael E. Gehring [ARGUED]
Stephen G. Harvey
Steve Harvey Law
1880 John F. Kennedy Boulevard
Suite 1715
Philadelphia, PA 19103
Counsel for Plaintiff-Appellee
James M. Yoch, Jr.
Young Conaway Stargatt & Taylor
1000 North King Street
Rodney Square
Wilmington, DE 19801
Quincy M. Crawford, III [ARGUED]
Kevin C. Maclay
Nathaniel R. Miller
Todd E. Phillips
Caplin & Drysdale
One Thomas Circle, N.W.
Suite 1100
Washington, DC 20005
2
Counsel for Defendants-Appellees
Forrest R. Hansen
Robert M. Palumbos [ARGUED]
Duane Morris
30 South 17th Street
Philadelphia, PA 19103
David G. Januszewski
Cahill Gordon & Reindel
32 Old Slip
New York, NY 10005
Counsel for Third Party-Appellant
______________
OPINION
______________
SHWARTZ, Circuit Judge.
CPR Management, S.A. (“CPR”) and Deutsche Bank
A.G. (“Deutsche Bank”) both claim entitlement to the proceeds
emanating from a $50 million partnership interest (the
“Proceeds”) in Devon Park Bioventures, L.P. (the “Devon Park
Interest”). An arbitrator directed Devon Park Bioventures,
L.P. and its general partner, Devon Park Associates, L.P.
(collectively, “Devon Park”), to distribute the Proceeds to
CPR. Pursuant to the Federal Arbitration Act (“FAA”), CPR
seeks to confirm the award, and Devon Park and Deutsche
3
Bank seek to vacate it. In addition, Devon Park, who has no
claim to the Proceeds, seeks to interplead Deutsche Bank for a
determination as to who is entitled to the Proceeds. Because
the District Court properly (1) struck Devon Park’s
interpleader claim, (2) confirmed the arbitration award, and (3)
awarded prejudgment interest, we will affirm.
I
A
Sebastian Holdings, Inc. (“SHI”), owned by Alexander
Vik, borrowed funds from Deutsche Bank. App. 740 ¶ 42;
App. 741 ¶¶ 46-47; App. 737-38 ¶¶ 20-23. SHI entered a
limited partnership agreement with Devon Park (the “LP
Agreement”), App. 157, and invested $25 million to acquire
the Devon Park Interest, App. 132 ¶ 16.
Deutsche Bank issued margin calls in connection with
its loan to SHI, but SHI claimed that it lacked funds to satisfy
the calls. App. 737 ¶ 21. Deutsche Bank then sued SHI in the
Commercial Court, Queen’s Bench Division of the High Court
of Justice in England and Wales for repayment of the loan and
received a $235,646,345 judgment, which SHI has not
satisfied. App. 737 ¶¶ 17, 22; App. 738 ¶ 28; App. 742 ¶
61(a).
SHI, however, twice transferred the Devon Park
Interest. First, it allegedly sold the Devon Park Interest to VBI
Corporation (“VBI”), a company allegedly controlled by Vik’s
father (“Vik, Sr.”). App. 737-38 ¶ 23; App. 137 ¶ 43. SHI
later allegedly assigned (via an Assignment Agreement) the
Devon Park Interest to Universal Logistic Matters, S.A.
4
(“ULM”), which later changed its name to CPR (another
company allegedly related to Vik, Sr.).1 App. 762-63 ¶ 132;
App. 133 ¶ 17; App. 133 ¶ 20. SHI paid Devon Park millions
of dollars for transferring the Devon Park Interest to ULM.
App. 765 ¶¶ 148-50.
Devon Park eventually made fund distributions to the
limited partners, but it had difficulties transmitting the
Proceeds to CPR, App. 134 ¶¶ 22-25; App. 135-36 ¶¶ 32-41;
App. 766, ¶ 155, so it withheld most of them. App. 136 ¶ 41;
App. 134 ¶ 24.
B
CPR believed that the failure to distribute the Proceeds
violated the LP Agreement, so it initiated an arbitration to
compel Devon Park to turn over the Proceeds. App. 769 ¶ 177.
Deutsche Bank asked to intervene in the arbitration, but the
arbitrator denied the request. App. 770 ¶ 178. Devon Park
then answered CPR’s arbitration demand and raised two
counterclaims, one of which sought a declaration whether the
Assignment Agreement is a valid, binding, and enforceable
contract. App. 527.
While the arbitration was pending, Deutsche Bank sued
CPR, SHI, and Devon Park in Delaware Chancery Court (the
“Delaware Action”), and CPR and SHI in New York state court
(the “New York Action”), alleging a conspiracy to commit
fraud and seeking to unwind SHI’s allegedly fraudulent
transfer of the Devon Park Interest to CPR. App. 770-71 ¶¶
1
The parties stipulated that CPR is the entity formerly
known as ULM, App. 600, mooting the second counterclaim.
5
179-89. Devon Park moved to stay the arbitration pending
resolution of these state actions. App. 274-81. The arbitrator
denied Devon Park’s motion. App. 139 ¶ 60. In response,
Devon Park informed the arbitrator that it would no longer
participate in the arbitration. App. 139 ¶ 62; App. 628-31;
App. 140 ¶ 69. The arbitrator thereafter held the scheduled
final hearing and awarded CPR the Proceeds, plus prejudgment
interest compounded quarterly, Supp. App. 209, but stayed
Devon Park’s obligation to pay CPR if doing so conflicted with
any orders in the Delaware Action, App. 140 ¶¶ 66-67; App.
536.2
C
CPR petitioned the Pennsylvania Court of Common
Pleas to confirm the arbitration award. App. 141 ¶ 75. Devon
Park removed CPR’s petition to the United States District
Court for the Eastern District of Pennsylvania, App. 46,
answered the petition, and attempted to interplead Deutsche
Bank pursuant to Federal Rule of Civil Procedure 22. App.
46-49; App. 142 ¶¶ 81-84. Deutsche Bank answered the
interpleader complaint and brought its own claims, seeking to
set aside the purported transfer of the Devon Park Interest from
SHI to CPR, to declare SHI and CPR alter egos, and to find
Devon Park, CPR, and SHI liable for fraud and conspiracy.
App. 775-81 ¶¶ 208-72.
2
Before the final arbitration hearing, the Delaware
Chancery Court entered a temporary restraining order
prohibiting Devon Park from distributing the Proceeds to CPR.
App. 771 ¶ 185.
6
The District Court struck the interpleader complaint and
dismissed all third parties and claims, reasoning that (1) a
motion to confirm an arbitration award is a motion, not a
pleading; and (2) a pleading is a prerequisite to Rule 22
interpleader; so (3) Devon Park’s interpleader action was
procedurally improper. App. 1-4. The District Court then
granted CPR’s petition to confirm the arbitration award
because the arbitrator had a basis to (1) refuse postponing the
final hearing under 9 U.S.C. § 10(a)(3), as the parties had
months to develop their case and had already engaged in
substantial discovery; (2) dismiss Devon Park’s counterclaim
seeking a declaratory judgment concerning the Assignment
Agreement’s validity under 9 U.S.C. § 10(a)(4), as the
arbitrator expressly allowed Devon Park to pursue discovery
but Devon Park chose to quit the arbitration and thus failed to
present its evidence concerning the counterclaim; and (3)
award prejudgment interest, compounded quarterly. CPR
Mgmt., S.A. v. Devon Park Bioventures, L.P., 463 F. Supp. 3d
525, 532-39 (E.D. Pa. 2020).
Devon Park and Deutsche Bank appeal.
II
A3
We have jurisdiction over Devon Park’s appeal of the
interpleader and confirmation orders pursuant to 28 U.S.C.
3
The District Court had jurisdiction over the petition to
confirm the arbitration award pursuant to 28 U.S.C. § 1331 and
9 U.S.C. § 203.
7
§ 1291 and 9 U.S.C. § 16(a). We also have jurisdiction over
Deutsche Bank’s appeal of the interpleader order.
Generally, we have jurisdiction over only “final
decisions of the district courts of the United States[.]” 28
U.S.C. § 1291. “A final order is one that ‘ends the litigation
on the merits and leaves nothing for the court to do but execute
the judgment.’” Gen. Motors Corp. v. New A.C. Chevrolet,
Inc., 263 F.3d 296, 311 n.3 (3d Cir. 2001) (quoting Catlin v.
United States, 324 U.S. 229, 233 (1945)). The order striking
Devon Park’s interpleader did not end this litigation as to all
claims and parties. When the District Court entered that order,
it still had to address the arbitration dispute between CPR and
Devon Park. Thus, the interpleader order was not then a final,
appealable order. Cf. Gaines v. Sunray Oil Co., 539 F.2d 1136,
1140 (8th Cir. 1976) (holding that an order dismissing certain
interpleader defendants from the action was not a final,
appealable order because it “did not dispose of the rights and
liabilities of all of the parties to this litigation”); CBS Steel &
Forge Co. v. Shultz, 191 F.2d 683, 683 (9th Cir. 1951) (per
curiam) (holding that an order dismissing a third-party
complaint “was not a final decision, within the meaning of 28
U.S.C.[] § 1291, and was not appealable”).
CPR wrongly contends that an order striking an
interpleader complaint is equivalent to an immediately
appealable order denying intervention under Rule 24 of the
Federal Rules of Civil Procedure and so Deutsche Bank should
have filed its appeal within thirty days of that order. See
United States v. Alcan Aluminum, Inc., 25 F.3d 1174, 1179
(3d Cir. 1994). Rule 22 and Rule 24 serve different purposes.
On one hand, Rule 22 interpleader allows a person or entity in
possession of disputed property in which it has no interest to
8
place the property with a court and then permits parties with an
interest in the property to ask a court to resolve who has the
right to the property. On the other hand, Rule 24 allows non-
parties to ensure their interests in the merits of the case are not
“adversely affected by litigation conducted without their
participation.” Stallworth v. Monsanto Co., 558 F.2d 257, 265
(5th Cir. 1977); see also Buckner v. Schaefer, 14 F.3d 593, *1
(4th Cir. 1993) (Table) (per curiam) (noting that an important
purpose of Rule 24 is the “protection of nonparties from
adverse judgments entered in their absence”). When a non-
party is denied intervention, it loses its ability to protect its
interest in the merits of the litigation, and that ability can only
be restored by a successful, immediate appeal. Here, the
arbitration focused on whether Devon Park wrongly withheld
the Proceeds from a limited partner under the terms of the LP
Agreement. Deutsche Bank was not a party to that agreement
and thus any ruling would not have resulted in an “adverse
judgment” against it. While the award may have an impact on
Deutsche Bank’s collection efforts, that is not equivalent to an
adverse judgment. Thus, the purpose of Rule 24 and the
reasons why an order denying intervention is immediately
appealable are not implicated.
Therefore, we will deny CPR’s motion to dismiss
Deutsche Bank’s appeal of the interpleader order based on
purported untimeliness.
B4
4
“The District Court’s interpretation of the Federal
Rules of Civil Procedure is a legal issue that we review de
novo.” EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253, 264
(3d Cir. 2010) (alteration omitted).
9
The District Court properly struck Devon Park’s Rule
22 interpleader complaint. To reach this conclusion, we
examine the relationship between the Federal Rules of Civil
Procedure and the FAA.
The Federal Rules of Civil Procedure apply to
proceedings “relating to arbitration” under the FAA, “except
as [the FAA] provide[s] other procedures.” Fed. R. Civ.
P. 81(a)(6)(B). One such procedure is set forth in 9 U.S.C. § 6,
which states that “[a]ny application to the court [under the
FAA] shall be made and heard in the manner provided by law
for the making and hearing of motions, except as otherwise
herein expressly provided.” Therefore, a petition to confirm an
arbitration award under the FAA is “a motion, not a pleading.”
IFC Interconsult, AG v. Safeguard Int’l Partners, LLC., 438
F.3d 298, 308 (3d Cir. 2006). The Federal Rules of Civil
Procedure separate pleadings from motions. Pleadings provide
notice to an adverse party that it has a claim or defense and is
seeking court intervention. Rule 7 sets forth various pleadings,
including a third-party complaint, see Fed. R. Civ. P. 7(a), and
Rule 13 further provides that crossclaims and counterclaims
must proceed via pleadings, see Fed. R. Civ. P. 13(b), (g).
Motions, on the other hand, ask a court to take an action and
seek “a court order.” Fed. R. Civ. P. 7(b). Mindful of the
distinction between pleadings and motions, we have held that
parts of the Federal Rules of Civil Procedure that apply to
pleadings do not apply to cases commenced by way of a motion
to confirm or vacate an arbitration award pursuant to the FAA.
See IFC Interconsult, 438 F.3d at 309 (holding that Rule
12(a)(4)(A), which then sets forth the timing for a responsive
10
pleading, is not applicable to FAA motions because such
motions are not pleadings).5
5
Our sister circuit courts have also held that other
Federal Rules of Civil Procedure do not apply in proceedings
to confirm or vacate an arbitration award. See D.H. Blair &
Co. v. Gottdiener, 462 F.3d 95, 107-08 (2d Cir. 2006) (holding
that Rule 55, governing default judgment, “does not operate
well in the context of a motion to confirm or vacate an
arbitration award” because such motions are “motions in an
ongoing proceeding rather than a complaint initiating a plenary
action”); Productos Mercantiles E Industriales, S.A. v. Faberge
USA, Inc., 23 F.3d 41, 46 (2d Cir. 1994) (same, regarding Rule
12(b)’s pleading requirements because the petitioner
“appropriately sought relief in the form of a motion”); Health
Servs. Mgmt. Corp. v. Hughes, 975 F.2d 1253, 1257-58 (7th
Cir. 1992) (same, regarding Rule 16’s scheduling and briefing
requirements because 9 U.S.C. § 6 “preempts” the Federal
Rules of Civil Procedure and provides that a petition to vacate
“is to be treated procedurally in the manner of a motion”); O.R.
Sec., Inc. v. Pro. Plan. Assocs., Inc., 857 F.2d 742, 748 (11th
Cir. 1988) (same, regarding Rule 8’s notice pleading
requirements); see also Chelmowski v. AT&T Mobility, LLC,
615 F. App’x 380, 381 (7th Cir. 2015) (non-precedential)
(holding that Rule 15(a)(1)(B), governing amendments to
pleadings, “applies to pleadings, not to motions, and so is
inapplicable in proceedings to vacate an arbitration award”);
cf. ISC Holding AG v. Nobel Biocare Fin. AG, 688 F.3d 98,
116 (2d Cir. 2012) (“We conclude that [the petitioner] could
not [voluntarily] dismiss its petition to compel arbitration
pursuant to Rule 41(a)(1)(A)(i) because that provision does not
apply to petitions to compel under 9 U.S.C. § 4 in the
circumstances here.”).
11
Because Rule 22 interpleader proceeds via pleading, it
is not a motion and is thus not permitted under the FAA. Rule
22 allows a plaintiff with “claims” that potentially expose it “to
double or multiple liability” to initiate an interpleader action.
Fed. R. Civ. P. 22(a). A “defendant exposed to similar liability
may [also] seek interpleader through a crossclaim or
counterclaim.” Fed. R. Civ. P. 22(a)(2). Devon Park is the
respondent in this case, and its Rule 22 interpleader complaint
attempted to assert a counterclaim against CPR and a third-
party complaint against Deutsche Bank. Supp. App. 108. In
doing so, Devon Park proceeded via pleading rather than
motion. However, because this action is one to confirm an
arbitration award, it is governed by the FAA, which, as
explained above, provides for motion practice rather than
pleading practice. See 9 U.S.C. § 6. Since Devon Park’s effort
to invoke Rule 22 conflicts with the FAA’s motion approach,
Devon Park is not permitted to initiate an interpleader action in
this FAA confirmation proceeding.6 See Fed. R. Civ.
P. 81(a)(6)(B).
6
Deutsche Bank and Devon Park cite cases that they
argue allowed interpleader claims to proceed concurrently with
motions to confirm or vacate an arbitration award. See
Deutsche Br. at 15; Devon Park Br. at 38-39. At oral
argument, Devon Park focused specifically on United States ex
rel. Milestone Tarant, LLC v. Federal Insurance Co., 815 F.
Supp. 2d 41 (D.D.C. 2011). Tarant is distinguishable,
however, because unlike the present action that was initiated
by a motion pursuant to the FAA, the Tarant action was
initiated via complaint. Id. at 42-43; see also No. 1:08-CV-
02186, ECF No. 1 (complaint). Thus, the FAA and its
distinction between motion and pleading practice were not
implicated in Tarant. The other cases relied on by Deutsche
12
This conclusion comports with the fact that petitions to
confirm or vacate arbitration awards are “summary
proceeding[s]” that “do[] not [require] the district court to carry
on a formal judicial proceeding,” Teamsters Loc. 177 v. United
Parcel Serv., 966 F.3d 245, 255 (3d Cir. 2020), and furthers the
FAA’s “national policy favoring arbitration with just the
limited review needed to maintain arbitration’s essential virtue
of resolving disputes straightaway,” Hall St. Assocs., LLC v.
Mattel, Inc., 552 U.S. 576, 588 (2008); see also Booth v. Hume
Pub., Inc., 902 F.2d 925, 933 (11th Cir. 1990) (“To allow a
respondent to assert counterclaims that are beyond the scope of
the defenses enumerated in the [FAA] would change the nature
of the confirmation proceedings and would defeat the purpose
of the [FAA].”); Ottley v. Schwartzberg, 819 F.2d 373, 377 (2d
Cir. 1987) (“Actions to confirm arbitration awards . . . are
straightforward proceedings in which no other claims are to be
adjudicated.”).
The District Court therefore correctly struck the
interpleader application as a procedurally improper response to
CPR’s petition to confirm the arbitration award.7
Bank and Devon Park are similarly inapposite. See, e.g.,
Lynch v. Whitney, 419 F. App’x 826 (10th Cir. 2011) (non-
precedential); Tittle v. Enron Corp., 463 F.3d 410 (5th Cir.
2006); Caro v. Fid. Brokerage Servs., LLC, No. 3:12-CV-
01066, 2014 WL 3907920 (D. Conn. Aug. 11, 2014); Sullivan
v. Lumber Liquidators, Inc., No. 2:13-CV-00070, 2013 WL
4049102 (D. Nev. Aug. 9, 2013); Holborn Oil Trading Ltd. v.
Interpetrol Bermuda Ltd., 658 F. Supp. 1205 (S.D.N.Y. 1987).
7
Contrary to Devon Park’s assertion, Devon Park Br.
at 40-41, the District Court resolved Devon Park’s declaratory
judgment request set forth in the second count of its
13
III8
A
We next address whether the District Court erred in
granting the petition to confirm the arbitration award in favor
of CPR.9 We conclude it did not.
A district court may vacate an arbitration award on four
“narrow grounds”:
interpleader complaint, Supp. App. 119, when the Court
struck Devon Park’s “interpleader claims” and “all third-party
claims and parties.” App. 4. Moreover, as explained, Devon
Park failed to present evidence supporting its entitlement to
such relief when it declined to participate in the final arbitration
hearing.
8
Because of “the strong federal policy in favor of
commercial arbitration, [district courts] begin with the
presumption that the award is enforceable” and enforce the
award “absent a reason to doubt the authority or integrity of the
arbitral forum.” Sutter v. Oxford Health Plans LLC, 675 F.3d
215, 219 (3d Cir. 2012), as amended (Apr. 4, 2012), aff’d, 569
U.S. 564 (2013). “On appeal from a district court’s ruling on
a motion to confirm or vacate an arbitration award, we review
its legal conclusions de novo and its factual findings for clear
error.” Id.9
Both Devon Park and Deutsche Bank cross-petitioned
to vacate the arbitration award. CPR moved to dismiss
Deutsche Bank’s petition for lack of standing.
To understand Deutsche Bank’s theory of standing, it is
necessary to review its actions before the arbitrator. Deutsche
Bank sought to intervene in the arbitration as part of its efforts
14
(1) where the award was procured
by corruption, fraud, or undue
means;
to collect its foreign judgment. It contended that the Proceeds
belonged to the judgment debtor and, as the judgment creditor,
it had a stake in the outcome of the arbitration. Deutsche Bank,
however, was not a party to the arbitration agreement, and its
efforts to intervene in the arbitration were denied. As a result,
it was not a party to the arbitration itself and lacks statutory
standing to challenge the award. See 9 U.S.C. §§ 10(a), 11
(allowing district courts to vacate or modify an arbitration
award upon the application of “any party to the arbitration”);
see also Katir v. Columbia Univ., 15 F.3d 23, 24-25 (2d Cir.
1994) (holding that an individual “lack[ed] standing to
challenge [an arbitration award]” because “[she] was not a
party to the arbitration”). Deutsche Bank did, however,
attempt to participate in the arbitration and asks that we review
the arbitrator’s order denying its request to intervene. It asserts
it has standing to do so primarily based on Caplan v. Fellheimer
Eichen Braverman & Kaskey, 68 F.3d 828 (3d Cir. 1995).
Caplan, however, dealt with a situation where an entity who
was not a party to a district court proceeding attempted to file
an appeal. Id. at 836.
Even assuming Caplan is applicable here and provides
Deutsche Bank standing, Deutsche Bank still failed to present
its arguments challenging the arbitrator’s order to the District
Court. It has therefore forfeited its challenge to the arbitrator’s
order. See DIRECTV Inc. v. Seijas, 508 F.3d 123, 125 n.1 (3d
Cir. 2007) (“It is well established that arguments not raised
before the District Court are waived on appeal.”).
15
(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.
Sutter v. Oxford Health Plans LLC, 675 F.3d 215, 219 (3d Cir.
2012), as amended (Apr. 4, 2012) (quoting 9 U.S.C. § 10(a)),
aff’d, 569 U.S. 564 (2013). Devon Park claims that the award
should be vacated based upon § 10(a)(3) for the arbitrator’s
refusal to postpone the hearing and refusal to consider evidence
and upon § 10(a)(4) for exceeding his powers. Neither
provision provides a basis for relief.
B
Under § 10(a)(3), a court may vacate an arbitration
award where the arbitrator engages in “misconduct” in refusing
16
to adjourn the hearing or hear relevant evidence or engaging in
“any other misbehavior” that prejudices a party. 9 U.S.C.
§ 10(a)(3). “Misconduct” is conduct that “so affects the rights
of a party that it may be said that he was deprived of a fair
hearing.” Newark Stereotypers’ Union No. 18 v. Newark
Morning Ledger Co., 397 F.2d 594, 599 (3d Cir. 1968); see
also Apex Fountain Sales, Inc. v. Kleinfeld, 818 F.2d 1089,
1094 (3d Cir. 1987) (“Under Federal law, misconduct apart
from corruption, fraud, or partiality in the arbitrators justifies
reversal only if it so prejudices the rights of a party that it
denies the party a fundamentally fair hearing.”). A “fair
hearing” is one where the parties have notice and an
opportunity to present evidence and arguments before an
impartial arbitrator. Newark Stereotypers’ Union, 397 F.2d at
600; see also Bowles Fin. Grp., Inc. v. Stifel, Nicolaus & Co.,
22 F.3d 1010, 1013 (10th Cir. 1994) (collecting cases holding
“that a fundamentally fair hearing requires only notice,
opportunity to be heard and to present relevant and material
evidence and argument before [unbiased] decision makers”).
The arbitrator provided the parties an opportunity to
have a fair hearing and was prepared to hear relevant evidence.
See Newark Stereotypers’ Union, 397 F.2d at 599 (stating that
misconduct occurs when the conduct “so affects the rights of a
party that it may be said that he was deprived of a fair
hearing”). CPR and Devon Park were provided with notice of
the claims, App. 527, 541, were given an opportunity to obtain
discovery from each other as well as from Deutsche Bank, SHI,
VBI, Vik, Vik Sr., and other related entities, App. 527, 529,
including discovery about the validity of the Assignment
Agreement, and had the chance to present their evidence and
arguments to an unbiased arbitrator. Devon Park, however,
declined to gather certain evidence and abandoned its right to
17
present evidence, defend itself, and participate in the hearing
the arbitrator convened. App. 529.
The arbitrator’s refusal to postpone the hearing also did
not constitute misconduct because the arbitrator had a
“reasonable basis” to deny the requested stay. Schmidt v.
Finberg, 942 F.2d 1571, 1574 (11th Cir. 1991); see also Laws
v. Morgan Stanley Dean Witter, 452 F.3d 398, 400 (5th Cir.
2006); Floyd Cnty. Bd. of Educ. v. EUA Cogenex Corp., 198
F.3d 245 (6th Cir. 1999) (Table); DVC-JPW Invs. v.
Gershman, 5 F.3d 1172, 1174 (8th Cir. 1993). Devon Park
moved to stay the arbitration, App. 528, after CPR and Devon
Park had (1) agreed that their claims were arbitrable, App. 541,
(2) served and responded to pleadings, App. 526-27, (3)
engaged in months of discovery, App. 527, and (4) received a
final hearing date, App. 527. Thus, the arbitrator gave the
parties months to prepare for the arbitration and had an interest
in moving the case to its conclusion. Devon Park also did not
show “sufficient cause,” 9 U.S.C. § 10(a)(3), to postpone the
hearing. Simply because other fora were being asked to decide
whether certain entities were responsible for satisfying
Deutsche Bank’s judgment did not mean that the contractual
issues concerning the LP and Assignment Agreements became
moot. Finally, Devon Park was not prejudiced by the absence
of the stay. Devon Park could have sought, and in fact
received, protection from competing orders when the arbitrator
sua sponte suspended Devon Park’s obligation to pay CPR if
payment conflicted with any order in the Delaware Action.
App. 536.
C
18
The District Court also correctly found that the
arbitrator did not exceed his powers in finding in favor of CPR
and therefore did not violate § 10(a)(4). “An arbitrator
oversteps these limits . . . when he[,] [for example,] grants
relief in a form that cannot be rationally derived from the
parties’ agreement and submissions[] or issues an award that is
so completely irrational that it lacks support altogether.”
Sutter, 675 F.3d at 219-20. The award is supported by the
evidence and “rationally derived from the parties’ agreement.”
Id. (citation omitted). The evidence confirms the arbitrator’s
finding that there was a valid contract between Devon Park and
CPR. App. 532. The Assignment Agreement showed that SHI
assigned the Devon Park Interest to ULM, and the record
reflects that Devon Park consented to this assignment. App.
236, 248, 532. Consistent with the parties’ stipulation, the
arbitrator then determined that ULM and CPR were the same
entity. App. 532, 284. Since SHI assigned its interest to ULM,
and ULM and CPR are the same entity, the arbitrator correctly
found that CPR was a party to the LP Agreement. App. 532.
Devon Park contends that the arbitrator failed to address
whether CPR procured the Assignment Agreement by fraud,
but Devon Park failed to appear at the final hearing and make
its argument about this subject. Thus, it cannot now claim that
the arbitrator acted irrationally on a subject Devon Park failed
to present at the hearing.
Furthermore, the arbitrator’s interpretation of the LP
Agreement is supported by its terms. Section 5.2(a) of the LP
Agreement required Devon Park to pay distributions to limited
partners on a pro rata basis. App. 178, 532. The record shows
that Devon Park paid its first distribution to CPR in March
2015 but then failed to make other distributions. App. 532-34;
App. 134 ¶ 23; App. 137 ¶ 46. Accordingly, the arbitrator
19
appropriately found that Devon Park violated the LP
Agreement and that, under the LP Agreement, CPR was
entitled to the withheld distributions. App. 536.
IV
The arbitrator also correctly awarded prejudgment
interest. The FAA provides three grounds for modifying or
correcting an arbitration award, namely where (a) there has
been a “material miscalculation” or mistake in identifying a
party or property, (b) an award was based upon matters not
presented to the arbitrator, or (c) the award “is imperfect” in its
form that does not affect the merits.10 9 U.S.C. § 11(a)-(c). If
10
9 U.S.C. § 11 provides:
In either of the following cases the
United States court in and for the
district wherein the award was
made may make an order
modifying or correcting the award
upon the application of any party
to the arbitration--
(a) Where there was an
evident material
miscalculation of figures or
an evident material mistake
in the description of any
person, thing, or property
referred to in the award.
20
one of these events has occurred, then the court “may modify
and correct the award, so as to effect the intent thereof and
promote justice.” Id.Devon Park argues only that the prejudgment interest
award should be eliminated to promote justice between the
parties. Devon Park Br. at 30 (quoting 9 U.S.C. § 11).
Promoting justice, standing alone, is not one of the enumerated
grounds for modifying or correcting an arbitration award. See
9 U.S.C. § 11(a)-(c). Rather, the structure of § 11 shows that a
district court must first conclude that at least one of the grounds
for modification exists and, if so, then the court may modify
the award “to effect the intent thereof and promote justice
between the parties.” 9 U.S.C. § 11. In other words, the
enumerated subsections set forth the conditions that must exist
(b) Where the arbitrators
have awarded upon a matter
not submitted to them,
unless it is a matter not
affecting the merits of the
decision upon the matter
submitted.
(c) Where the award is
imperfect in matter of form
not affecting the merits of
the controversy.
The order may modify and correct
the award, so as to effect the intent
thereof and promote justice
between the parties.
21
before the court may even consider § 11’s final sentence,
which tells the court that any resulting order must effectuate
the intent of the award and promote justice. Thus, as the
District Court succinctly explained, “[j]ustice only comes into
the equation after the district court determines that one of the
three grounds for modification stated in § 11 applies.”11 CPR,
463 F. Supp. 3d at 537-38. Thus, Devon Park’s assertion that
the promotion of justice alone stands as an independent basis
to modify an award is wrong.
Devon Park also incorrectly asserts that a prejudgment
interest award is limited to simple interest under 6 Del. C.
§ 2301(a). Even assuming a mistake of law falls within one of
the enumerated § 11 grounds to modify an arbitration award,
there was no mistake here. Delaware courts have interpreted
§ 2301(a) to give courts the discretion to award compound
interest. See Gotham Partners, L.P. v. Hallwood Realty
Partners, L.P., 817 A.2d 160, 173 (Del. 2002); Edgewater
Growth Cap. Partners LP v. H.I.G. Cap., Inc., 68 A.3d 197, 238
11
Several of our sister circuit courts have endorsed this
reading of 9 U.S.C. § 11. See UBS Fin. Servs., Inc. v.
Padussis, 842 F.3d 336, 342 (4th Cir. 2016); UHC Mgmt. Co.
v. Computer Scis. Corp., 148 F.3d 992, 998 (8th Cir. 1998);
Corey v. New York Stock Exch., 691 F.2d 1205, 1212 (6th Cir.
1982); see also Barranco v. 3D Sys. Corp., 734 F. App’x 885,
887 (4th Cir. 2018) (non-precedential) (stating that “[w]e may
modify an arbitration award in order to effect the intent of the
award and ‘promote justice between the parties’ when there is
‘an evident material miscalculation of figures,’” (citation
omitted)).
22
(Del. Ch. 2013). Thus, we will not disturb the arbitrator’s
award of prejudgment interest, compounded quarterly.12
V
For the foregoing reasons, we will deny CPR’s motion
to dismiss Deutsche Bank’s appeal and affirm the District
Court’s orders striking the interpleader motion and confirming
the arbitration award.
12
Because Devon Park’s arguments for vacating or
modifying the arbitration award clearly fail on their merits, we
do not rely on whether Devon Park waived its confirmation
defenses by prematurely quitting the arbitration. However, we
firmly admonish Devon Park for its choice to do so. Failure to
attend an arbitration may result in waiver. See Int’l Bhd. of
Elec. Workers, Loc. Union No. 545 v. Hope Elec. Corp., 380
F.3d 1084, 1101 (8th Cir. 2004) (where a “particular issue is
arbitrable, . . . a party cannot refuse to participate in arbitration
or fail in arbitration to raise a particular argument concerning
the merits of the grievance and later seek judicial resolution of
that same issue”); see also Dean v. Sullivan, 118 F.3d 1170,
1172 (7th Cir. 1997) (“A disputant cannot stand by during
arbitration, withholding certain arguments, then, upon losing
the arbitration, raise such arguments in federal court.”
(quotation marks omitted)); Teamsters Loc. Union No. 764 v.
J.H. Merritt & Co., 770 F.2d 40, 42-43 (3d Cir. 1985) (“[A]
party may waive its right to raise on appeal an objection to the
decision of an arbitrator when the party failed to address the
objection before the arbitrator in the first instance.”).
23