Three S Delaware Inc v. DataQuick Info Systems ( 2007 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
THREE S DELAWARE, INCORPORATED, 
Successor in interest to Steele
Software Systems Corporation,
Plaintiff-Appellant,
v.  No. 06-1227
DATAQUICK INFORMATION SYSTEMS,
INCORPORATED, a Delaware
Corporation,
Defendant-Appellee.

THREE S DELAWARE, INCORPORATED, 
Successor in interest to Steele
Software Systems Corporation,
Plaintiff-Appellant,
v.  No. 06-2056
DATAQUICK INFORMATION SYSTEMS,
INCORPORATED, a Delaware
Corporation,
Defendant-Appellee.

Appeals from the United States District Court
for the District of Maryland, at Baltimore.
J. Frederick Motz, District Judge.
(1:05-cv-02017-JFM)
Argued: May 22, 2007
Decided: July 12, 2007
Before WIDENER, WILKINSON, and KING, Circuit Judges.
2 THREE S DELAWARE v. DATAQUICK
Affirmed by published opinion. Judge King wrote the opinion, in
which Judge Widener and Judge Wilkinson joined.
COUNSEL
ARGUED: Brian Alexander Glasser, BAILEY & GLASSER, L.L.P.,
Charleston, West Virginia, for Appellant. Beverly Johnson, DORSEY
& WHITNEY, L.L.P., Irvine, California, for Appellee. ON BRIEF:
William F. Ryan, Jr., John F. Carlton, Kenneth Oestreicher, Paul M.
Nussbaum, WHITEFORD, TAYLOR, PRESTON, L.L.P., Baltimore,
Maryland, for Appellant. James E. Gray, Stephen E. Marshall, Jason
C. Rose, VENABLE, L.L.P., Baltimore, Maryland, for Appellee.
OPINION
KING, Circuit Judge:
Steele Software Systems Corporation, now known as Three S Dela-
ware, Incorporated ("3S"), appeals from the district court’s denial of
its motion to vacate a 2005 arbitration award of more than $6.1 mil-
lion (the "Award") rendered in Maryland in favor of DataQuick Infor-
mation Systems, Incorporated ("DataQuick").1 On appeal, 3S
contends that the court should have vacated the Award on several
statutory and common law grounds. More specifically, 3S asserts that
(1) a portion of the Award was not drawn from the essence of the
underlying agreement, (2) the arbitrator manifestly disregarded rele-
vant law, (3) the Award was procured by undue means, (4) the arbi-
trator was partial, (5) the Award was procured by arbitrator
misconduct, and (6) the arbitrator exceeded his power in making the
Award. As explained below, we affirm the district court.
1
Although the Award was rendered against Steele Software Systems
Corporation, that entity no longer exists. Its successor in interest, 3S, is
pursuing this appeal.
THREE S DELAWARE v. DATAQUICK 3
I.
A.
3S is a Baltimore-based company that provides title reports and
appraisals to financial institutions in the real estate lending business.
As part of its business, 3S developed software that allowed financial
institutions to more quickly receive appraisals and title reports (the
"3S system"). DataQuick, on the other hand, is a nationwide provider
of data cataloguing real property features and transactions from sev-
eral major cities. On January 23, 1996, 3S and DataQuick entered into
a License Agreement (the "Agreement"), under which DataQuick
agreed to provide 3S with the DataQuick database, which was to be
used as part of the 3S system. In exchange for the database, 3S was
required to pay DataQuick a licensing fee each month. Pursuant to the
Agreement, DataQuick was entitled to either a minimum monthly fee
of $7,500 or royalty fees of $5.00 to $7.50 per transaction, depending
on the number of transactions that 3S "accessed and billed" in connec-
tion with DataQuick’s data. Agreement ¶ 4.1.2 To determine the num-
ber of transactions accessed and billed, 3S was to prepare monthly
reports detailing 3S’s use of the database. Id. ¶ 4.4. The Agreement
further provides that "3S will not reproduce, sell, publish or in any
manner commercially exploit any information obtained through the
DATAQUICK Database except as provided by the terms and condi-
tions of this Agreement." Id. ¶ 7.3.
The Agreement also contains provisions limiting each party’s lia-
bility in the event of a breach and directing the parties to arbitrate any
dispute arising thereunder. In this regard, the Agreement first pro-
vides that neither party will "be liable for any indirect, incidental or
consequential damages, including, but not limited to, lost income or
lost revenue." Agreement ¶ 6.6. It then provides that any dispute aris-
ing under the Agreement is subject to California law, and either party,
upon failing to resolve such a dispute, may make a written demand
for arbitration to the American Arbitration Association (the "AAA").
Id. ¶ 8.4.
2
The Agreement is found at J.A. 193-99. (Citations to "J.A. ___" refer
to the Joint Appendix filed by the parties in this appeal.)
4 THREE S DELAWARE v. DATAQUICK
During the course of their dealings under the Agreement, 3S never
prepared the mandated monthly reports detailing the number of trans-
actions in which it used DataQuick’s database. In order to justify this
inaction, 3S contends that it did not access the database enough to
trigger any payment of more than the minimum monthly fee. Even so,
3S did not always promptly pay the minimum monthly fees, and on
April 27, 2000, the parties entered into another agreement requiring
3S to pay DataQuick $60,000 in installments for unpaid fees. Thereaf-
ter, in March 2003, DataQuick terminated the Agreement.
B.
On December 12, 2003, DataQuick filed a seven-count complaint
against 3S in California state court. The complaint sought, inter alia,
damages in excess of $170,000 for 3S’s failure to pay the agreed upon
minimum monthly fees, plus restitution in excess of $170,000 for
3S’s alleged unjust enrichment. On April 23, 2004, the California
court granted 3S’s request to compel arbitration and ordered 3S to ini-
tiate an action to resolve the dispute before the AAA. When 3S failed
to initiate any action before the AAA, the California court issued
another order on September 27, 2004, requiring 3S to initiate an arbi-
tration proceeding by September 30, 2004. On September 30, 2004,
3S submitted a one-page online arbitration demand to the AAA. This
demand stated that the claim amount was $170,000 and described the
claim as follows: "[DataQuick] sued [3S] for breach of contract for
allegedly failing to pay for services rendered in a contract to provide
real property value data nationally." J.A. 262. 3S then added its own
claim for arbitration, alleging that DataQuick "breached first by pro-
viding data/information unuseable, outdated or in an insufficient man-
ner. [3S] claims that [DataQuick] anticipatorily breached the contract
and frustrated the purpose of the contract by providing useless data
or no data at all." Id. On October 8, 2004, a representative of the
AAA acknowledged receipt of 3S’s online arbitration demand and
asked DataQuick to file a response thereto on or before October 22,
2004. On October 12, 2004, DataQuick wrote to the AAA explaining
that the arbitration claim stemmed from its complaint in the California
court and attached the complaint and related court orders. These items
were placed in the AAA file.
The parties eventually agreed to the appointment of James W. Con-
stable, a lawyer in Baltimore, Maryland, as arbitrator. The discovery
THREE S DELAWARE v. DATAQUICK 5
process was contentious and, throughout the pre-hearing process,
DataQuick had difficulty determining its damages because 3S refused
to turn over relevant documents detailing the underlying transactions.
The arbitrator eventually issued an April 19, 2005 order requiring 3S
to disclose documents that would be "sufficient for the Arbitrator and
DataQuick . . . to determine, with a substantial degree of certainty, the
number of transactions involving [3S’s] resale and/or distribution of
DataQuick’s data." J.A. 562. The arbitrator also informed 3S that a
negative inference might be drawn if 3S withheld documents that
should have been disclosed.
On April 20, 2005, 3S wrote to DataQuick stating that it was "with-
drawing its claim from the arbitration effective immediately." J.A.
222. Notwithstanding this representation, no formal withdrawal
request was sent to the arbitrator. During a conference call with the
arbitrator on April 26, 2005, however, 3S orally requested permission
to withdraw its claim. The arbitrator explained to 3S that "it could
withdraw its claim but that its withdrawal would not end the arbitra-
tion of [DataQuick’s] counterclaim." Id. at 223. The arbitrator then
suggested that 3S "remain in the case so as not to jeopardize its posi-
tion." Id. After this conference call, 3S made repeated attempts to
delay the proceedings, including requesting a California state court to
enjoin the arbitration proceedings, failing to timely disclose witness
lists and exhibits, and moving to disqualify the arbitrator. During a
pre-hearing conference call on May 17, 2005, 3S’s counsel again
asserted that 3S was withdrawing from the proceedings. The arbitrator
explained that 3S had a right to withdraw, but that the arbitration pro-
ceedings would continue as to DataQuick’s claims. 3S’s counsel then
summarily withdrew from the conference call.
C.
On May 23, 2005, the arbitration hearing commenced in Baltimore.
After DataQuick gave its opening statement, in which it stated its
intention to use the testimony of Scott Steele (the owner of 3S) from
a prior trial in Maryland to prove DataQuick’s damages, Steele, who
was present, ordered his counsel to immediately leave the hearing.
During the exchange that followed, the arbitrator strongly encouraged
3S to stay and participate in the arbitration proceedings. He also
explained that the proceedings would continue without 3S and, absent
6 THREE S DELAWARE v. DATAQUICK
its participation, he might not be able to fully understand any defenses
3S may have against DataQuick’s claims. Steele and his counsel then
left the arbitration hearing with their exhibits and witnesses.
The arbitration hearing proceeded, and DataQuick submitted over
200 exhibits and five witnesses during the course of the proceeding.
All of the exhibits used by DataQuick were documents 3S had dis-
closed during discovery. DataQuick also used Steele’s testimony and
3S’s expert testimony from a prior case litigated in a Maryland state
court, styled Steele Software Systems Corp. v. First Union National
Bank ("First Union"). In that matter, 3S had sued First Union
National Bank ("First Union") on a breach of contract claim. 3S
alleged therein that First Union had failed to use the 3S system as fre-
quently as required in their contract. During trial of that dispute, 3S
relied on evidence regarding the total transactions that it had the capa-
bility of performing for First Union from January 1998 through
December 2001. Based on the evidence, the jury awarded 3S a verdict
of more than $37 million against First Union.
Following the arbitration hearing underlying these court proceed-
ings, DataQuick submitted a post-hearing brief to the arbitrator,
requesting an award in excess of $30 million. 3S elected not to submit
a responsive post-hearing brief of its own, and the arbitration record
was closed on June 3, 2005. In the meantime, 3S filed for an injunc-
tion against the arbitrator in the District of Maryland, seeking to
enjoin him from issuing an award. The district court denied this
request, and 3S thereafter filed a motion to reopen the arbitration
hearing, claiming that it had not realized DataQuick was requesting
damages of over $30 million. The arbitrator informed 3S that it would
only reopen the hearing if 3S met certain conditions, including: pay-
ing DataQuick $195,000 in interim damages, paying DataQuick’s
attorney fees, waiving any right to appeal the final arbitration award,
and agreeing not to seek bankruptcy protection. 3S declined to agree
to these terms, and the arbitrator denied the motion to reopen.
On August 25, 2005, the arbitrator issued the Award, which under-
lies the district court proceedings and this appeal. In devising the
Award, the arbitrator found that 3S had breached the Agreement and
that Steele had deliberately misled DataQuick into believing that 3S
had never achieved the amount of monthly sales necessary to trigger
THREE S DELAWARE v. DATAQUICK 7
a per transaction calculation of fees. The arbitrator also drew a nega-
tive inference against 3S because of its efforts to withhold informa-
tion from him and DataQuick. He then determined, "[a]fter reviewing
the evidence, including exhibits and testimony and the record of the
First Union case, . . . that the number of fee generating transactions
would result in fees of at least $10,000 per month from July 1, 1996
through December 31, 1996, $15,000 per month for 1997, $40,000
per month for 1998, $35,000 per month for 1999, $22,000 per month
for 2000, $23,000 per month for 2001 and $24,000 per month for
2002." J.A. 228. As a result, the arbitrator, after making deductions
for fees previously paid by 3S, awarded DataQuick the sum of
$1,495,500, plus prejudgment interest of $771,051.64, on its breach
of contract claim against 3S.
The arbitrator also found that 3S had been unjustly enriched by the
jury’s verdict in favor of 3S in the First Union trial. Although 3S
received its award of damages in that case on the basis of projected
transactions with First Union, the arbitrator found that these transac-
tions would have used DataQuick’s database. The arbitrator con-
cluded that because 3S had "been paid for a product for which
DataQuick would have been entitled to a transactional fee," Data-
Quick was entitled to be compensated "for those transactions under
the theory of unjust enrichment." J.A. 229. He therefore awarded
DataQuick ten percent of 3S’s First Union jury verdict, minus some
reductions, for an additional sum of $3,447,634. The arbitrator then
awarded DataQuick additional unjust enrichment damages of
$460,000 for 3S’s improper use of DataQuick’s database after the
Agreement had been terminated. Thus, DataQuick was awarded a
total of $6,174,185.64 from 3S, plus attorney’s fees and costs of arbi-
tration.
D.
On October 19, 2005, 3S filed the underlying proceeding in the dis-
trict court, seeking to vacate the Award. After a hearing on the matter,
the court, by a bench ruling, upheld the Award, with the exception of
the arbitrator’s grant of attorney fees and costs to DataQuick. The dis-
trict court’s Judgment was entered on January 17, 2006. 3S has timely
appealed, and we possess jurisdiction pursuant to 28 U.S.C. § 1291.
8 THREE S DELAWARE v. DATAQUICK
II.
Judicial review of an arbitration award in federal court is "substan-
tially circumscribed." Patten v. Signator Ins. Agency, Inc., 441 F.3d
230, 234 (4th Cir. 2006). In fact, the scope of judicial review for an
arbitrator’s decision "is among the narrowest known at law because
to allow full scrutiny of such awards would frustrate the purpose of
having arbitration at all — the quick resolution of disputes and the
avoidance of the expense and delay associated with litigation." Apex
Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th
Cir. 1998). Indeed, as we have emphasized, in reviewing such an
award, "a district or appellate court is limited to determine whether
the arbitrators did the job they were told to do — not whether they
did it well, or correctly, or reasonably, but simply whether they did
it." Remmey v. PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994)
(internal quotation marks omitted). In assessing on appeal a district
court’s denial of a motion to vacate an arbitration award, we review
de novo the court’s legal rulings. Patten, 441 F.3d at 234. Any factual
findings made by the district court in affirming such an award are
reviewed for clear error. Peoples Sec. Life Ins. Co. v. Monumental
Life Ins. Co., 991 F.2d 141, 145 (4th Cir. 1993).
III.
In order for a reviewing court to vacate an arbitration award, the
moving party must sustain the heavy burden of showing one of the
grounds specified in the Federal Arbitration Act or one of certain lim-
ited common law grounds. Patten v. Signator Ins. Agency, Inc., 441
F.3d 230, 234 (4th Cir. 2006). The Federal Arbitration Act provides
that a court may only vacate an arbitration award on one of the fol-
lowing grounds:
(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
THREE S DELAWARE v. DATAQUICK 9
shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehav-
ior by which the rights of any party have been preju-
diced; 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(a). The permissible common law grounds for vacating
such an award "include those circumstances where an award fails to
draw its essence from the contract, or the award evidences a manifest
disregard of the law." Patten, 441 F.3d at 234.
3S contends in this appeal that the district court should have
vacated the Award to DataQuick under several of the permissible stat-
utory or common law bases. Specifically, 3S asserts that (1) a portion
of the Award was not drawn from the essence of the Agreement, (2)
the arbitrator manifestly disregarded relevant law, (3) the Award was
procured by undue means, (4) the arbitrator was partial, (5) the Award
was procured by arbitrator misconduct, and (6) the arbitrator
exceeded his power in making the Award. We address each of 3S’s
contentions in turn.3
A.
First, 3S contends that the portion of the Award predicted on the
First Union jury verdict should be vacated because it cannot be ratio-
nally derived from the Agreement. As we have recognized, an arbitra-
tion award can be vacated by a district court if it "fails to draw its
essence from the agreement." Patten, 441 F.3d at 235. Such a circum-
stance can arise when an arbitrator has disregarded or modified unam-
biguous contract provisions or based an award upon his own personal
notions of right and wrong. See id. An arbitration award, however,
3
3S also appeals the district court’s denial of its motion in that court
to compel the preparation of the arbitration hearing transcript, as well as
its motion for reconsideration of the court’s Judgment affirming the
Award. We are content to summarily affirm those discretionary rulings.
10 THREE S DELAWARE v. DATAQUICK
"does not fail to draw its essence from the agreement merely because
a court concluded that an arbitrator has misread the contract." Id.
(internal quotation marks omitted); see also U.S. Postal Serv. v. Am.
Postal Workers Union, ALF-CIO, 204 F.3d 523, 527 (4th Cir. 2000)
("[A]s long as 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." (internal quotation marks omitted)).
3S asserts that the First Union aspect of the Award was not drawn
from the essence of the Agreement because it contradicts the clear
language thereof. In so doing, 3S relies on two provisions of the
Agreement. First, it contends that this portion of the Award contra-
dicts the clear language of the Agreement because the arbitrator
awarded damages based upon constructive sales, when the Agreement
provides that 3S was to pay DataQuick only when 3S actually "ac-
cessed and billed" DataQuick’s data. See Agreement ¶ 4.1. On this
point, however, 3S ignores the Agreement’s explicit provision that 3S
cannot commercially exploit DataQuick’s database. See id. ¶ 7.3. As
found by the arbitrator, without DataQuick’s data, 3S would not have
been able to offer its services to First Union and thus would not have
prevailed against First Union on its breach of contract claim. Given
that 3S claimed ownership of DataQuick’s data during the First
Union litigation, the related unjust enrichment damages were justifi-
ably drawn from the provision of the Agreement that prohibits 3S’s
commercial exploitation of DataQuick’s data.
Next, 3S contends that the unjust enrichment aspect of the Award
contradicts the clear language of the Agreement because it limits the
types of damages DataQuick can recover. Specifically, the Agreement
provides that "[i]n no event, shall either party be liable for any indi-
rect, incidental or consequential damages, including, but not limited
to, lost income or lost revenue." Agreement ¶ 6.6. Paragraph 6.6 of
the Agreement does not, however, prohibit an award of restitution, the
type of damages the arbitrator awarded for DataQuick’s unjust enrich-
ment claim. Because an award based on unjust enrichment does not
contradict the clear language of the Agreement, 3S cannot meet its
burden of showing that the Award is not drawn from the essence of
the Agreement, and the Award cannot be vacated on this ground.
THREE S DELAWARE v. DATAQUICK 11
Barb.
3S next contends that the Award should be vacated because the
arbitrator acted with a manifest disregard of the relevant law. Specifi-
cally, 3S asserts that the arbitrator (1) ignored relevant California law
when it awarded both breach of contract and unjust enrichment dam-
ages, and (2) ignored 3S’s valid statute of limitations defense. In eval-
uating whether an arbitrator has manifestly disregarded the law, we
have heretofore concluded that "a court’s belief that an arbitrator mis-
applied the law will not justify vacation of an arbitral award. Rather,
appellant is required to show that the arbitrators were aware of the
law, understood it correctly, found it applicable to the case before
them, and yet chose to ignore it in propounding their decision." Rem-
mey v. PaineWebber, Inc., 32 F.3d 143, 149 (4th Cir. 1994); see also
Dawahare v. Spencer, 210 F.3d 666, 670-71 (6th Cir. 2000) (conclud-
ing that in order to vacate for manifest disregard of law, arbitrator
must have clearly stated law and expressly chosen to ignore it).
On this aspect of its appeal, 3S first asserts that the arbitrator mani-
festly disregarded California law by awarding DataQuick both breach
of contract and unjust enrichment damages under the Agreement. 3S
contends that, under California law, these remedies are mutually
exclusive. DataQuick contends, however, that 3S has not met its
heavy burden of establishing that the arbitrator manifestly disregarded
the relevant law. Indeed, 3S does not point to any indication in the
record where the arbitrator discussed or was presented with the poten-
tially relevant California legal principles. Nor does 3S point to any
evidence that the arbitrator expressly chose to ignore such principles.
3S then asserts that the arbitrator manifestly disregarded the law by
ignoring its statute of limitations defense. In its response to Data-
Quick’s claims, 3S generally pleaded a statute of limitations defense
and, at the beginning of the arbitration hearing, 3S’s counsel stated
that it believed some of DataQuick’s damage claims to be time
barred. Again, however, 3S has not presented any evidence that the
arbitrator was advised of the specifics of the statute of limitations pro-
visions and then expressly ignored them. In fact, the arbitrator may
not have been made aware of such principles because 3S voluntarily
left the hearing before the arbitrator had an opportunity to hear or
consider 3S’s affirmative defenses to DataQuick’s claims. Thus, 3S
12 THREE S DELAWARE v. DATAQUICK
cannot meet its burden of showing that the arbitrator manifestly disre-
garded the law, and the Award cannot be vacated on this ground.
C.
3S also contends on appeal that the Award should be vacated
because it was procured by undue means, in that DataQuick failed to
give 3S notice of its intent to seek damages of more than $170,000.
The term "undue means" has generally been interpreted to mean
something like fraud or corruption. See Remmey, 32 F.3d at 147; see
also Nat’l Cas. Co. v. First State Ins. Group, 430 F.3d 492, 499 (1st
Cir. 2005) ("The best reading of the term ‘undue means’ under the
maxim noscitur a sociis ["it is known from fellows or allies"] is that
it describes underhanded or conniving ways of procuring an award
that are similar to corruption or fraud, but do not precisely constitute
either."). 3S contends that, based on DataQuick’s complaint in the
California court, it believed that it was only subject to a claim for
damages up to the sum of $170,000. As found by the district court,
however, the complaint clearly states that the claim for damages was
for a minimum of $170,000. Furthermore, the arbitrator found that
DataQuick would have had earlier knowledge of the potential dam-
ages award in the arbitration proceedings if 3S had not deliberately
withheld the relevant information. Thus, 3S cannot meet its burden of
showing a procurement of the Award by undue means, and the Award
cannot be vacated on this ground.
D.
3S next contends that the Award should be vacated because there
is evidence that the arbitrator was in fact partial in favor of Data-
Quick. Specifically, 3S asserts that such partiality existed and is
established because the arbitrator ignored its statute of limitations
defense, failed to give it an opportunity to respond, and stated that it
could not attend the arbitration hearing. To establish partiality under
9 U.S.C. § 10(a)(2), 3S was obligated to "demonstrate that a reason-
able person would have to conclude that an arbitrator was partial to
the other party to the arbitration." ANR Coal Co., Inc. v. Cogentrix of
N.C., Inc., 173 F.3d 493, 500 (4th Cir. 1999) (internal quotation
marks omitted). To determine if a party has established such partial-
ity, a court should assess four factors: "(1) the extent and character
THREE S DELAWARE v. DATAQUICK 13
of the personal interest, pecuniary or otherwise, of the arbitrator in the
proceedings; (2) the directness of the relationship between the arbitra-
tor and the party he is alleged to favor; (3) the connection of that rela-
tionship to the arbitrator; and (4) the proximity in time between the
relationship and the arbitration proceeding." Id. Furthermore, "[w]hen
considering each factor, the court should determine whether the
asserted bias is direct, definite and capable of demonstration rather
than remote, uncertain or speculative and whether the facts are suffi-
cient to indicate improper motives on the part of the arbitrator." Id.
(internal quotation marks omitted).
In the circumstances presented, we must also reject this appellate
contention of 3S. First, 3S has not addressed any of the relevant fac-
tors in its appellate brief, nor has it presented any evidence to show
that the arbitrator had an improper relationship with DataQuick. Sec-
ond, the evidence that 3S does present (that the arbitrator ignored its
statute of limitations defense, failed to give it an opportunity to
respond, and excluded it from the hearing) either amount to misrepre-
sentations or fail to demonstrate anything more than the fact that the
arbitrator ruled against 3S on certain issues. Finally, there has been
an ample showing that the arbitrator gave 3S generous leeway during
the arbitration proceedings, by extending filing deadlines, accepting
exhibits and witnesses after the extended deadlines had passed, and
strongly encouraging 3S to participate in the arbitration proceedings.
Thus, 3S is unable to meet its burden of showing that the arbitrator
was partial, and the Award cannot be vacated on this ground.
E.
3S next contends that the Award should be vacated because it was
procured by arbitrator misconduct. Specifically, 3S asserts that such
misconduct is shown by the arbitrator’s refusal to (1) consider 3S’s
pertinent and material evidence, and (2) allow 3S to attend the arbitra-
tion hearing after it withdrew from the proceedings. First, under 9
U.S.C. § 10(a)(3), an arbitrator commits misconduct if he refuses "to
hear evidence pertinent and material to the controversy." 3S asserts
that the arbitrator refused to hear pertinent and material evidence
when it denied 3S’s motion to reopen the hearing. Although the arbi-
trator denied 3S’s motion to reopen, a federal court is entitled to
vacate an arbitration award only if the arbitrator’s refusal to hear per-
14 THREE S DELAWARE v. DATAQUICK
tinent and material evidence deprives a party to the proceeding of a
fundamentally fair hearing. See UMWA v. Marrowbone Dev. Co., 232
F.3d 383, 388 (4th Cir. 2000) (concluding that arbitrator committed
misconduct by failing to provide parties with full and fair hearing);
see also Hoteles Condado Beach, La Concha & Convention Ctr. v.
Union De Tronquistas Local 901, 763 F.2d 34, 40 (1st Cir. 1985) ("A
federal court may vacate an arbitrator’s award only if the arbitrator’s
refusal to hear pertinent and material evidence prejudices the rights
of the parties to the arbitration proceedings.").
Although the arbitrator ultimately declined to reopen and hear 3S’s
evidence, the arbitrator did not commit misconduct in so doing
because 3S was not deprived of a fundamentally fair hearing. First,
3S would have had an ample opportunity to present its evidence if its
owner had not insisted on abandoning the arbitration hearing. In fact,
the arbitrator strongly encouraged 3S to remain at the hearing to pre-
sent its evidence and its defenses. Second, after the arbitration hearing
was completed, the arbitrator was willing to accept and review a post-
hearing brief from 3S, which it declined to submit. Finally, even
though the arbitrator placed certain conditions on 3S in order to
reopen the hearing, the arbitrator, under the AAA rules, was vested
with broad discretion in this regard and was not obliged to reopen the
hearing in any event. See AAA Rule R-36 ("The hearing may be
reopened on the arbitrator’s initiative, or upon application of a party,
at any time before the award is made." (emphasis added)). In this
instance, the arbitrator gave 3S ample opportunities to present its evi-
dence, and the Award cannot be vacated simply because 3S failed and
refused to take advantage of those opportunities.
Second, 3S asserts that the arbitrator committed misconduct when
it declined to allow 3S to attend the arbitration hearing. This conten-
tion also fails because the arbitrator never requested that 3S abandon
the hearing. To the contrary, 3S voluntarily left the hearing after the
arbitrator had strongly encouraged it to remain and present its evi-
dence and defenses. In addition, there is no indication that 3S actually
sought to attend the hearing after it withdrew from the arbitration, or
that the arbitrator barred it from attending. Thus, 3S cannot meet its
burden of showing arbitrator misconduct, and the Award cannot be
vacated on this ground.
THREE S DELAWARE v. DATAQUICK 15
F.
Lastly, 3S contends on appeal that the Award should be vacated
because the arbitrator exceeded his power in making it. Specifically,
3S asserts that the arbitrator exceeded his power by (1) granting
DataQuick damages for time periods outside those claimed in the
state court complaint, and (2) hearing and deciding a case that should
have been determined by three arbitrators instead of one.4 In evaluat-
ing whether an arbitrator has exceeded his power, we have generally
recognized that "any doubts concerning the scope of arbitrable issues
as well as any doubts concerning the scope of the arbitrators’ reme-
dial authority, are to be resolved in favor of the arbitrators’ authority
as a matter of federal law and policy." Peoples Sec. Life Ins. Co. v.
Monumental Life Ins. Co., 991 F.2d 141, 147 (4th Cir. 1993) (internal
quotation marks omitted). First, with regard to the time frame covered
by the damages award, 3S contends that, because DataQuick’s com-
plaint in the California court alleged that its contract damages began
around September 2002 and its unjust enrichment damages began
around December 1999, the arbitrator was not entitled to award dam-
ages to DataQuick for any contract breach or unjust enrichment that
took place prior thereto. The problem with this contention is that,
although DataQuick may not have specifically alleged in its com-
plaint that contract damages occurred prior to September 2002 and
that unjust enrichment damages occurred prior to December 1999,
DataQuick raised these claims before the arbitrator during the hearing
and in its post-hearing brief. Furthermore, 3S acknowledged that such
damages were being sought when it submitted a statute of limitations
defense to the arbitrator, asserting that any such damages suffered by
DataQuick prior to December 1999 were time barred. Thus, the arbi-
trator was entitled to conclude that these claims were legitimately
before him for resolution.
3S finally asserts that the arbitrator exceeded his power because the
arbitration proceedings should have been heard by a panel of three
arbitrators instead of by only one. 3S contends that because Data-
4
3S briefly mentions on appeal that the arbitrator exceeded his power
by relitigating the First Union judgment and granting injunctions. 3S has
failed to make any showing to support these contentions, and thus they
are also rejected.
16 THREE S DELAWARE v. DATAQUICK
Quick’s actual claim was in the millions of dollars, it had the right to
insist that three arbitrators hear the case, pursuant to the AAA’s Com-
plex Case Procedures. First, this contention is contrary to the arbitra-
tion provisions of the Agreement. When the Agreement discusses the
appointment of an arbitrator, it uses the term in the singular, and it
simply does not provide for disputes to be resolved by a panel of three
arbitrators. See Agreement ¶ 8.4. Furthermore, we have heretofore
recognized that, in such a circumstances, a court generally lacks juris-
diction to determine the number of arbitrators needed to hear and
resolve an arbitration. See Dockser v. Schwartzberg, 433 F.3d 421,
423 (4th Cir. 2006) (concluding that when "[t]he parties have agreed
that arbitrator selection should follow the rules and procedures of the"
AAA, "the number of the arbitrators is a procedural question to be
answered exclusively in that forum"). Thus, 3S has failed to satisfy
its burden of showing that the arbitrator exceeded his power, and the
Award cannot be vacated on that basis.
IV.
Pursuant to the foregoing, we affirm the district court’s denial of
3S’s motion to vacate the Award.
AFFIRMED