Communications Consultant, Inc. v. Nextel Communications of Mid-Atlantic, Inc.

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
7-13-2005
Comm Consul Inc v. Nextel Comm Mid Atl
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-2750
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Case No: 04-2750
COMMUNICATIONS CONSULTANT, INC.,
Appellee
v.
NEXTEL COMMUNICATIONS OF THE MID-ATLANTIC, INC., d/b/a NEXTEL
and/or NEXTEL COMMUNICATIONS,
Appellant
_________________________________
On appeal from the United States District Court
for the Eastern District of Pennsylvania
District Court No.: 04-MC-41
District Judge: The Honorable Charles R. Weiner
__________________________________
Submitted pursuant to LAR 34.1(a)
June 28, 2005
Before: *NYGAARD, SMITH, and FISHER, Circuit Judges
(Filed: July 13, 2005 )
_____________________
OPINION OF THE COURT
_____________________
SMITH, Circuit Judge.
Nextel Communications appeals from an order entered on May 28, 2004, in which
*Honorable Richard L. Nygaard assumed senior status on July 9, 2005
the United States District Court for the Eastern District of Pennsylvania granted the
motion of appellee Communications Consultant, Inc. (“CCI”) to confirm an arbitration
award in favor of CCI. The District Court found that under the contract between Nextel
and CCI, Nextel had effectively waived the right to challenge the legal analysis of the
arbitration panel. The District Court also determined that in light of the considerable
deference owed by federal courts to the determinations of arbitration panels, there was no
basis for overturning the award in favor of CCI. We will affirm the judgment of the
District Court.
Because we write only for the parties, we restrict our discussion to those facts and
legal principles necessary to the resolution of this appeal. The dispute between the parties
arises out of a March 10, 2000 Authorized Representative Agreement (the “Agreement)
between Nextel and CCI, under which CCI was authorized to solicit customers for
Nextel’s wireless telecommunications services. Nextel terminated the agreement on
September 10, 2001. Nextel cited as the basis for the termination the fact that CCI had
purportedly sent an advertisement bearing the Nextel trademark to a marketing target
without first obtaining the Nextel pre-approval required under the Agreement. CCI
initiated arbitration proceedings pursuant to the Agreement, and the arbitrators found in
favor of CCI. The arbitration panel determined that CCI had not violated the pre-
approval provisions contained in the Agreement, reasoning that the advertisement that
resulted in CCI’s termination was virtually identical to an earlier advertisement that had
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already been approved by Nextel, and that once approval for an advertisement had been
obtained, the Agreement did not require further approvals for continued use of the same
or substantially identical advertisements. The arbitration panel also awarded $601,112 in
damages to CCI, including lost profits from the period during which CCI would
presumably have continued to serve as Nextel’s marketing representative had it not been
improperly terminated by Nextel on September 10, 2001.
CCI filed a motion seeking to confirm the arbitration award pursuant to the Federal
Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16. Nextel filed a response in opposition,
arguing that the arbitrators had exceeded their authority by ignoring applicable Virginia
law. The District Court rejected Nextel’s arguments and granted CCI’s motion to confirm
the award.
Review of arbitration awards under the FAA is “extremely deferential.” Dluhos v.
Strasberg, 321 F.3d 365, 370 (3d Cir. 2003). Vacatur is appropriate only in “exceedingly
narrow” circumstances, such as where arbitrators are partial or corrupt, or where an
arbitration panel manifestly disregards, rather than merely erroneously interprets, the law.
See id.; Local 863 Int’l Bhd. of Teamsters v. Jersey Coast Egg Producers, Inc., 773 F.2d
530, 533 (3d Cir. 1985) (stating that error of law is insufficient basis for vacatur).
Likewise, an arbitrator’s “‘improvident, even silly, factfinding’ does not provide a basis
for a reviewing court to refuse to enforce the award.” Major League Umpires Assoc. v.
American League of Professional Baseball Clubs, 357 F.3d 272, 279-80 (3d Cir. 2004)
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(quoting Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001)).
The deference we owe to the arbitration panel places a high hurdle before Nextel’s
challenge to the panel’s analysis. This hurdle becomes insurmountable for Nextel in light
of the language of the arbitration provision contained in the Agreement, in which Nextel
as a matter of contract further restricted its own right to challenge the arbitration panel’s
determinations. The arbitration clause indicates that disputes arising under the
Agreement “shall be resolved by binding arbitration” and that “[t]he decision of the
arbitrators shall be final and unreviewable for error of law or legal reasoning of any kind
and may be enforced in any court having jurisdiction of the parties.” We have held that a
settlement agreement containing similar language eliminates an arbitration participant’s
ability to challenge the arbitration panel’s legal determinations in federal court. See
Tabas v. Tabas, 47 F.3d 1280, 1288 (3d Cir. 1995). In the presence of such language, the
only permissible basis upon which a litigant may challenge the panel’s award is if the
litigant can show that the panel’s actions were influenced by “corruption, fraud, or
partiality,” or that the panel failed to provide a hearing to consider each party’s views
prior to issuing its decision. See id. Nextel has not alleged “corruption, fraud, or
partiality,” and it is clear from the record that the panel conducted hearings and provided
extensive additional process prior to issuing its decision. The language of the
Agreement’s arbitration clause thus forecloses the very arguments raised by Nextel in its
appeal.
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Even if we were to consider the merits of Nextel’s assertion that the arbitration
panel exhibited “manifest disregard” for the law, we would still reject Nextel’s position.
With respect to the propriety of Nextel’s termination for cause, Nextel argues that the
arbitration panel ignored contractual language requiring CCI to obtain advance approval
for “any and all” advertisements bearing the Nextel mark. The arbitration panel did not
ignore this language; instead, it concluded that Nextel’s initial approval of an
advertisement conferred approval for use of the same or substantially similar
advertisements on a going forward basis. The arbitration panel based this finding on its
consideration of testimony provided by multiple witnesses concerning the manner in
which the parties to the Agreement had interpreted and applied the advertising approval
provisions on a day-to-day basis. Nextel’s disagreement with the panel’s assessment of
the competing evidence does not provide a basis for overturning the panel’s finding that
the disputed advertisement had indeed been approved by Nextel, and thus we will not
disturb the panel’s conclusion that Nextel was precluded from relying on CCI’s
distribution of the advertisement as the basis for terminating CCI “for cause.”
With respect to the issue of damages, Nextel argues that Virginia law limits the
award of lost profits on a wrongful termination claim to the amount that would have
accrued to the terminated party during the notice period required under a contractual
provision permitting termination without cause. Nextel relied before the arbitration panel
on Newberry Condominium Unit v. Green Team, 1989 WL 646412 (Va. Cir. Ct. 1989), a
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Virginia trial court decision that has never been cited by a higher Virginia court. The
arbitration panel found Newberry inapposite, and held that the Virginia Supreme Court’s
decision in Arwood v. Hill’s Adm’r, 135 Va. 235, 117 S.E. 603 (1923), barred Nextel
from seeking to limit its damages by retroactively converting a termination for cause to a
termination without cause. The arbitration panel reasoned that Newberry was
distinguishable, in that the defendant in Newberry had cited the contract’s “without
cause” provision as an alternative basis for its termination of the plaintiff at the time the
termination occurred.
Here, in contrast, the arbitration panel found that Nextel’s termination notice to
CCI relied solely upon the Agreement’s “for cause” termination provision. The panel
observed that the termination notice did not indicate to CCI that Nextel was, in the
alternative, providing thirty days notice and terminating CCI without cause, as
contemplated by the Agreement’s “without cause” termination provision. Nextel may
disagree with the approach reflected in the arbitration panel’s award decision, but it is
plain that the panel did not “manifestly disregard” Virginia law in connection with its
damages analysis. Moreover, any error attributable to the panel in terms of its treatment
of Newberry would be “an error of law or legal reasoning,” and the Agreement’s
arbitration provision bars Nextel from challenging the panel’s award on such grounds.
We have considered Nextel’s other arguments in addition to those discussed
above, and find them to be without merit. We have also considered CCI’s motion for
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Rule 38 sanctions. While we have rejected Nextel’s challenge to the arbitration panel’s
award, we do not believe that Nextel’s position is so frivolous as to warrant imposition of
sanctions. The judgment of the District Court will be affirmed.
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