The Householder Grp v. Caughran

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 20, 2009
No. 09-40111 Charles R. Fulbruge III
Summary Calendar Clerk
THE HOUSEHOLDER GROUP; SCOTT ALLEN HOUSEHOLDER;
STEPHEN M HORVATH; TODD ALLEN BERGERON,
Plaintiffs–Appellees
v.
THOMAS CAUGHRAN,
Defendant–Appellant
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:07-CV-316
Before HIGGINBOTHAM, CLEMENT, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
Thomas Caughran appeals the district court’s confirmation of an
arbitration award in favor of the plaintiffs (collectively “Householder Group”).
Householder Group has failed to file a brief. However, Caughran has not
demonstrated that there is a sufficient statutory basis for vacating the
arbitration award. Therefore, we AFFIRM.
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
No. 09-40111
BACKGROUND
The full set of background facts for this matter can be found in the district
court’s opinion affirming the arbitration award. See Householder Group v.
Caughran, 576 F. Supp. 2d 796 (E.D. Tex. 2008). To summarize, a panel of
arbitrators with the National Association of Securities Dealers, Inc. (“NASD”)
awarded Householder Group $39,500 in compensatory damages for breach of a
promissory note, $50,000 in compensatory damages for breach of a Branch Office
Agreement, and $70,000 in attorneys fees. Thereafter, Householder Group filed
a motion in the district court to confirm the award, and Caughran filed a motion
for vacatur.1
On September 17, 2008, the district court granted Householder Group’s
motion, denied Caughran’s motion, and confirmed the arbitration award.
Subsequently, Caughran filed this pro se appeal contending that the district
court erred by denying his motion to vacate and by confirming the award.
DISCUSSION
The Federal Arbitration Act (“FAA”) imposes significant limits on judicial
review in order that arbitration will be “efficient and cost-effective” for the
parties. Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d
278, 280 (5th Cir. 2007) (en banc). Although we review the confirmation of an
arbitration award de novo, we use the same standard as the district court to
determine whether the award should have been confirmed. See Am. Laser
Vision, P.A. v. Laser Vision Inst., L.L.C., 487 F.3d 255, 258 (5th Cir. 2007),
overruled on other grounds, 128 S. Ct. 1396 (2008). The effect is to make judicial
review of an arbitration award “exceedingly deferential,” and vacatur is
1
Caughran proceeded pro se during the arbitration and before the district court.
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No. 09-40111
available only for the limited reasons outlined in Section 10(a) of the FAA. See
id.; 9 U.S.C. § 10.
Since Caughran proceeds on this appeal pro se, the arguments in his brief
will be liberally construed. See Erickson v. Pardus, 551 U.S. 89, 94 (2007).
An arbitration award must be confirmed unless the court determines the
award should be vacated under Section 10, or modified or corrected under
Section 11, of the FAA. Hall Street Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct.
1396, 1402 (2008). Arbitration awards can no longer be vacated on nonstatutory,
common law grounds. See Citigroup Global Markets, Inc. v. Bacon, 562 F.3d
349, 358 (5th Cir. 2009) (interpreting Hall Street, 128 S. Ct. 1396). Thus,
Section 10 provides the exclusive grounds for vacatur. Hall Street, 128 S. Ct. at
1402.
Pursuant to Section 10(a) of the FAA, there are only four grounds for
which a court can vacate an arbitration award:
(1) [W]here the award was procured by corruption, fraud, or undue
means;
(2) [W]here there was evident partiality or corruption in the
arbitrators, or either of them;
(3) [W]here 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) [W]here 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.
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9 U.S.C. § 10(a). Notably, Section 10(a) does not provide for vacatur of an
arbitration award based on the merits of a party’s claim. Although most of
Caughran’s brief discusses the merits of various claims, we do not have authority
to conduct a review of an arbitrator’s decision on the merits. Kergosien v. Ocean
Energy, Inc., 390 F.3d 346, 357 (5th Cir. 2004), overruled on other grounds, 562
F.3d 349 (5th Cir. 2009); see also Major League Baseball Players Ass’n v. Garvey,
532 U.S. 504, 509 (2001). Thus, Caughran’s arguments concerning the merits
are irrelevant to our determination of whether there are statutory grounds
within Section 10(a) under which the arbitration award should be vacated.
Caughran does not specifically allege that the arbitration award should be
vacated due to one or more of the four reasons outlined in Section 10(a) of the
FAA. However, by liberally construing his brief, it appears that he alleges the
award should be vacated under either Section 10(a)(2) or (3).
Caughran claims he did not receive a fair hearing because the panel
prohibited him from introducing certain evidence. For example, he alleges that
he was not allowed to call several witnesses who would have substantiated his
claims. He also alleges that the panel would not allow him to admit
conversations he taped, or “transcripts” 2 of them, between himself and the
plaintiff Stephen Horvath. Caughran claims that these taped conversations
demonstrate that Horvath committed perjury. However, these allegations do not
warrant vacatur of the arbitration award pursuant to Section 10(a)(3).
As the district court correctly explained in its opinion confirming the
arbitration award:
2
The district court noted that these “transcripts” were merely summaries of the
conversations. Householder Group, 576 F. Supp. 2d at 802.
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The arbitrator is not bound to hear all of the evidence tendered by
the parties; however, he must give each of the parties to the dispute
an adequate opportunity to present its evidence and argument. An
evidentiary error must be one that is not simply an error of law, but
which so affects the rights of a party that it may be said that he was
deprived of a fair hearing.
Householder Group, 576 F. Supp. 2d at 802 (citations and internal quotations
omitted). However, even assuming, arguendo, that the panel erred in
prohibiting Caughran from making these admissions, he has not demonstrated
that such alleged errors rose to the level of depriving him of a fair hearing.
Caughran has not submitted any affidavits from the allegedly material
witnesses he claims he was not allowed to call during the arbitration. In the
absence of this, or other similar evidence, Caughran cannot demonstrate that an
error in permitting these witnesses to testify deprived him of a fair hearing.
Similarly, prohibiting Caughran from admitting the tapes or transcripts of his
conversations with Horvath did not deprive Caughran of a fair hearing. Horvath
testified at the arbitration hearing. Thus, Caughran had the opportunity to
cross-examine him on the perjury allegations. Accordingly, we find that
Caughran has not carried his burden of demonstrating that vacatur is warranted
under Section 10(a)(3).
In addition, Caughran makes frequent accusations in his brief that the
arbitration panel was actually biased. To establish evident partiality based on
actual bias, the party urging vacatur must produce specific facts from which “a
reasonable person would have to conclude that the arbitrator was partial to one
party.” Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 455 F. Supp. 2d 545,
550 (N.D. Tex. 2006) (citations and internal quotations omitted). This is an
“onerous burden,” because the urging party must demonstrate that the alleged
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partiality is “direct, definite, and capable of demonstration rather than remote,
uncertain or speculative.” Id. (citation and internal quotations omitted).
Liberally construing Caughran’s brief, it appears that he claims the panel
demonstrated actual bias in the following ways: (1) the panel refused to force
Householder Group to comply with the panel’s discovery orders; (2) the panel’s
rulings were one-sided and against Caughran; (3) the panel wanted him to lose
despite overwhelming evidence favoring Caughran; and (4) the panel awarded
$50,000 for the breach of the Branch Office Agreement in order to punish
Caughran for filing forty motions for evidence.
Despite these allegations, Caughran does not produce specific facts needed
to meet his “onerous burden” of establishing that the alleged arbitrator partiality
was “direct, definite, and capable of demonstration.” Weber, 455 F. Supp. 2d at
550. Thus, we are left with nothing more than speculative assertions in his
brief, which are insufficient to establish that vacatur is warranted under Section
10(a)(2). See id. Accordingly, we find that Caughran has not carried his burden
of demonstrating that vacatur is warranted under Section 10(a)(2).
We also note that based on the Supreme Court’s recent decision in Hall
Street, “manifest disregard of the law is no longer an independent ground for
vacating arbitration awards under the FAA.” Citigroup, 562 F.3d at 350(interpreting Hall Street, 128 S. Ct. 1396). Therefore, Caughran’s claim that the
arbitration award should be vacated due to manifest disregard for the law is
without merit.
Finally, in response to Caughran’s allegations that his Seventh
Amendment rights were violated, we note that the Seventh Amendment right
to a jury trial is limited by a valid arbitration provision. Am. Heritage Life Ins.
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Co. v. Orr, 294 F.3d 702, 711 (5th Cir. 2002). If claims are properly before an
arbitral forum pursuant to an arbitration agreement, then the Seventh
Amendment right to a jury trial vanishes. Id. This dispute was properly before
a panel of NASD arbitrators pursuant to the terms of the promissory note signed
by Caughran. Therefore, Caughran’s claim that his Seventh Amendment right
to a jury trial was violated is without merit.
AFFIRM.
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