Volanda Woods v. Pam Transport Inc-Lu

Case: 08-10730 Document: 00511580160 Page: 1 Date Filed: 08/23/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
August 23, 2011
No. 08-10730 Lyle W. Cayce
Clerk
VOLANDA WOODS,
Plaintiff–Appellee,
v.
PAM TRANSPORT INC-LU,
Defendant–Appellant.
Appeal from the United States District Court
for the Northern District of Texas
No. 3:07-CV-605
Before OWEN and HAYNES, Circuit Judges.*
PER CURIAM:**
Volanda Woods initiated this action in the district court seeking
enforcement of an arbitration award she obtained against her former employer,
P.A.M. Transport, Inc.-L.U. (P.A.M.), on claims arising out of an on-the-job
injury. Woods initiated the arbitration proceedings and sought compensation
pursuant to the P.A.M. Transport Texas Injury Plan (Plan), an ERISA plan that
*
This case is being decided by quorum due to the death of Judge William L. Garwood
on July 14, 2011. 28 U.S.C. § 46(d).
**
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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
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provides for mandatory arbitration of all on-the-job injury claims. The district
court granted Woods’s request for enforcement of the arbitration award after
modifying the award of pre-judgment interest. P.A.M. appeals several aspects
of the district court’s order. We affirm in part, reverse in part, and remand for
further proceedings.
I
P.A.M. initially contended that this court lacked subject matter
jurisdiction, asserting that there was no diversity of citizenship, the only basis
on which Woods now asserts jurisdiction. P.A.M. has since conceded that there
is diversity of citizenship, and we granted leave to amend to reflect that fact.1
In the district court, P.A.M. sought to void the arbitrator’s award,
challenging the arbitrator’s power to decide the parties’ underlying dispute.
P.A.M. asserts that the district court abused its discretion in denying its request
for discovery from the American Arbitration Association (AAA) for the purpose
of determining when and for what reason the arbitrator was allegedly removed
from the AAA’s Roster of Neutrals (Roster). P.A.M. alleges that the arbitrator
was removed from the Roster sometime after the arbitration proceedings
concluded but before the arbitrator entered the award. P.A.M. further asserts
that if the arbitrator was in fact not on the Roster at this time, he exceeded his
powers under the Plan, requiring vacatur of the award pursuant to 9 U.S.C.
§ 10(a)(4).
The district court denied P.A.M.’s discovery request, stating that P.A.M.’s
assertion that the arbitrator was removed from the Roster alone, without any
additional specifics, was not sufficient to support its discovery request and that,
in any event, P.A.M. had not demonstrated that the arbitrator’s removal from
the Roster would provide sufficient grounds for vacatur.
1
See 28 U.S.C. § 1653 (“Defective allegations of jurisdiction may be amended, upon
terms, in the trial or appellate courts.”).
2
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We review a district court’s discovery rulings for abuse of discretion2 and
“will affirm such decisions unless they are arbitrary or clearly unreasonable.”3
“The party seeking discovery bears the burden of showing its necessity.”4
In district court, P.A.M. consistently asserted, on information and belief,
that the arbitrator was removed from the Roster prior to entering the award.
But, P.A.M. does not provide any additional specifics beyond this assertion. In
particular, although acknowledging that the Roster is not publicly available and
alleging that the AAA refused to provide P.A.M. with information concerning the
Roster, P.A.M. has not provided even the vaguest indication in district court or
on appeal of how it may have learned that the arbitrator was in fact removed
from the Roster. “Despite having been given time to do so, [P.A.M.] has brought
forward nothing to show that its claim [that the arbitrator was not on the Roster
when he entered the award] had any semblance of substance or that it was even
asserted in good faith. The claim never achieved any more dignity than that of
a conclusory statement in an unverified answer [and other court memoranda].”5
Moreover, although P.A.M. argued this issue from the inception of these
proceedings, the record indicates that it did not move for discovery until all the
party documents were filed (including Woods’s response and P.A.M.’s reply),
even though the parties previously jointly moved to extend certain deadlines
specifically in order to allow P.A.M. to seek discovery of the matter. “The loser
2
Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 817 (5th Cir. 2004).
3
Id. (internal quotation marks omitted).
4
Freeman v. United States, 556 F.3d 326, 341 (5th Cir. 2009).
5
See Imperial Ethiopian Gov’t v. Baruch-Foster Corp., 535 F.2d 334, 337 (5th Cir. 1976)
(stating that a party seeking vacatur of an arbitration award based on allegations of a
disqualifying connection between the opposing party and the arbitrator does not have an
“unqualified right to any discovery it requested, limited by only relevancy,” particularly in a
summary proceeding where the party had failed to “come forward with anything tending to
show that the claim was asserted in good faith and for any reason other than delay”).
3
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in arbitration cannot freeze the confirmation proceedings in their tracks and
indefinitely postpone judgment by merely requesting discovery.”6 In light of
P.A.M.’s inability to produce any information, however vague, substantiating its
assertion, its unexplained delay in seeking discovery, and the summary nature
of proceedings to confirm an arbitration award, we decline to conclude that the
district court abused its discretion in denying P.A.M.’s discovery request,7
particularly considering the strong policy favoring expeditious enforcement of
arbitration awards.8
II
P.A.M. also contests the amount of the district court’s award of pre- and
post-judgment interest. We agree that the district court erred in its calculation
of both pre- and post-judgment interest and reverse that portion of the judgment.
A
The arbitrator’s written decision awards damages by category, including
compensation for past and future medical expenses, mental anguish, pain and
suffering, physical impairment, and lost earning capacity. It further provides
for an award of “prejudgment interest for past pain and suffering under
section 304, Subchapter B, of the Texas Finance Code, which authorizes
prejudgment interest in personal injury cases.” In confirming the award,
however, the district court awarded pre-judgment interest on all “past damages
6
Id.7
See Lyeth v. Chrysler Corp., 929 F.2d 891, 899 (2d Cir. 1991) (stating that the district
court did not err in observing that the discovery requests aimed at the AAA were attempts to
“engag[e] in a fishing expedition in an attempt to determine if there is some basis, however
farfetched, to prosecute a claim of bias”); see also Freeman v. United States, 556 F.3d 326, 341
(5th Cir. 2009) (“The party seeking discovery bears the burden of showing its necessity.”).
8
Positive Software Solutions v. New Century Mortg. Corp., 476 F.3d 278, 280 (5th Cir.
2007) (en banc) (“To assure that arbitration serves as an efficient and cost-effective alternative
to litigation, and to hold parties to their agreements to arbitrate, the FAA narrowly restricts
judicial review of arbitrator’s awards.”).
4
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awarded” rather than only on the amount attributable to past pain and
suffering.
P.A.M. argues that the district court was required to enforce the
arbitrator’s award as written and therefore erred in its pre-judgment interest
calculation. Woods, on the other hand, argues that under the provision of Texas
law cited by the arbitrator, an award of pre-judgment interest in personal injury
actions must be awarded as a matter of course on the entire amount of damages
for past injury, not just pain and suffering. Woods asserts a number of grounds
on which she claims the district court was authorized to correct this error.
Woods first argues that the district court had the authority to correct the
arbitrator’s alleged error under 9 U.S.C. § 13, which provides that a judgment
affirming, modifying, or correcting an arbitration award has “the same force and
effect” as, and is “subject to all the provisions of law relating to, a judgment in
an action,” and “may be enforced as if it had been rendered in an action in the
court in which it is entered.”9 Woods contends this provision authorizes the
district court “to enter a judgment that complies with [the] law, as if the
judgment had been rendered by that court, and not an arbitrator.” This
argument is unpersuasive. Under Woods’s broad interpretation of § 13, a district
court would be authorized to correct any legal errors committed by the
arbitrator. But it is well settled that the district court lacks this authority; its
review of arbitration awards is “‘extraordinarily narrow,’”10 and an arbitration
award is not subject to vacatur or modification merely because of the arbitrator’s
error or misunderstanding with respect to the law.11 Section 13 merely provides
9
9 U.S.C. § 13(c).
10
Harris v. Parker Coll. of Chiropractic, 286 F.3d 790, 792 (5th Cir. 2002) (quoting
Antwine v. Prudential Bache Securities, Inc., 899 F.2d 410, 413 (5th Cir. 1990)).
11
See Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576, 584–86 (2008) (holding that 9
U.S.C. §§ 10 and 11 provide the exclusive grounds upon which an arbitration award may be
5
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that a judgment enforcing an arbitration award has the same effect as any other
district court judgment; it does not independently authorize the district court to
correct an arbitrator’s erroneous legal ruling.
Alternatively, Woods argues that the district court properly refused to
affirm the arbitrator’s award of pre-judgment interest because the arbitrator
manifestly disregarded the law. This court previously recognized “manifest
disregard for the law” as an additional, nonstatutory basis for vacating an
arbitrator’s award.12 However, in light of the Supreme Court’s decision in Hall
Street Associates, L.L.C. v. Mattel, Inc.,13 which “restricts the grounds for vacatur
to those set forth in § 10 of the [FAA],” we have concluded that “manifest
disregard of the law is no longer an independent ground for vacating arbitration
awards under the FAA.”14 Moreover, we have never explicitly held that
“manifest disregard for the law” could provide an additional ground for
modification of an award, and even if we had, Hall Street restricts the grounds
for modification of an award to § 11 of the FAA, just as it restricts the grounds
for vacatur to those set forth in § 10.15 Thus, under Hall Street and Bacon,
“manifest disregard for the law” is not an independent ground for either vacating
or modifying arbitration awards under the FAA.
Finally, Woods argues that the district court acted properly in modifying
the arbitrator’s award of pre-judgment interest under 9 U.S.C. § 11(a) and (c),
vacated or modified, and that the parties may not agree to expand the scope of judicial review
to allow vacatur or modification based on the arbitrator’s legal error).
12
See Glover v. IBP, Inc., 334 F.3d 471, 474 (5th Cir. 2003) (quoting Harris, 286 F.3d
at 792).
13
552 U.S. at 584-86.
14
Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir. 2009) (citing Hall
Street Assocs., 552 U.S. at 584).
15
Hall Street Assocs., 552 U.S. at 584, 586.
6
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which allow for modification or correction where (1) “there was an evident
material miscalculation of figures,”16 or (2) “the award is imperfect in matter of
form not affecting the merits of the controversy.”17 Both contentions lack merit.
First, we have held that “an ‘evident material [mis]calculation’ occurs ‘where the
record that was before the arbitrator demonstrates an unambiguous and
undisputed mistake of fact and the record demonstrates strong reliance on that
mistake by the arbitrator in making his award.’”18 The award in this case does
not contain a material miscalculation under this standard, irrespective of
whether the arbitrator committed a legal error. Second, the award of pre-
judgment interest is not merely a matter of form, but goes to the merits of the
controversy.19
For the reasons discussed above, the district court erred in modifying the
arbitrator’s award of pre-judgment interest on past pain and suffering.
B
The arbitrator summarily awarded post-judgment interest “at the
maximum rate allowed by law beginning from the issuance of this Award until
the Award is satisfied.” Accordingly, the arbitrator largely left the matter of
post-judgment interest to the court enforcing the award. In turn, the district
court awarded post-judgment interest at the maximum rate allowed by Texas
state law, or 7.25%.
P.A.M. argues that the district court erred in looking to Texas law rather
than federal law to determine the applicable interest rate. As noted above,
16
9 U.S.C. § 11(a).
17
Id. § 11(c).
18
Prestige Ford v. Ford Dealer Computer Servs., Inc., 324 F.3d 391, 396 (5th Cir. 2003)
(quoting Valentine Sugars, Inc. v. Donau Corp., 981 F.2d 210, 214 (5th Cir. 1993)).
19
See West Virginia v. United States, 479 U.S. 305, 310 (1987) (“Prejudgment interest
is an element of complete compensation.” (citation omitted)).
7
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under 9 U.S.C. § 13, a judgment of a federal court confirming, modifying, or
correcting an arbitration award has the “the same force and effect” as, and is
“subject to all the provisions of law relating to, a judgment in an action,” and
“may be enforced as if it had been rendered in an action in the court in which it
is entered.”20 Unlike with pre-judgment interest, the post-judgment interest rate
for all judgments entered in federal courts, including those in diversity cases, is
governed by 28 U.S.C. § 1961.21 Pursuant to that statute, the post-judgment
interest rate is “equal to the weekly average 1-year constant maturity Treasury
yield, as published by the Board of Governors of the Federal Reserve System, for
the calendar week preceding the date of the judgment.”22 In this case, the
district court’s judgment was entered on February 19, 2008, and the applicable
rate appears to be 2.04%,23 though we leave this to the district court to
determine in the first instance.
Accordingly, the district court erred in applying Texas law to calculate
post-judgment interest. On remand, the district court should recalculate the
amount utilizing the appropriate rate.
***
The district court’s judgment is REVERSED IN PART, and this matter is
REMANDED for further proceedings consistent with this opinion.
20
9 U.S.C. § 13(c).
21
Travelers Ins. Co. v. Liljeberg Enters, Inc., 7 F.3d 1203, 1209 (5th Cir. 1993); see also
Parsons & Whittemore Ala. Mach. & Servs. Corp. v. Yeargin Constr. Co., 744 F.2d 1482, 1484
(11th Cir. 1984) (stating that “a district court judgment affirming an arbitration award is
governed by statutory post-judgment interest rates”).
22
28 U.S.C. § 1961(a).
23
Board of Governors of the Fed. Reserve Sys., Market Yield on U.S. Treasury
Securities at 1-year Constant Maturity, Quoted on Investment Basis,
http://federalreserve.gov/releases/h15/data.htm (last updated Apr. 13, 2011).
8
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PRISCILLA R. OWEN, Circuit Judge, concurring:
I fully join the panel quorum’s opinion and judgment. I write further only
to set forth an additional basis for affirming the district court’s decision to
enforce the arbitrator’s award, with the exception of the district court’s
determinations regarding the pre- and post-judgment interest issues.
Even if P.A.M. could demonstrate conclusively that the arbitrator was
removed from the AAA’s Roster before the final award was entered, P.A.M.
would not be entitled to vacatur on that basis. Under 9 U.S.C. § 10(a)(4), an
arbitration award may be vacated “where the arbitrators exceeded their powers.”
“Arbitration is a matter of contract: The powers of an arbitrator are
dependent on the provisions under which the arbitrators were appointed.”1
“Where arbitrators act ‘contrary to express contractual provisions,’ they have
exceeded their powers.”2 “If the contract creates a plain limitation on the
authority of an arbitrator, [this court] will vacate an award that ignores the
limitation.”3 “Where limitations on the arbitrator’s authority are uncertain or
ambiguous, however, ‘they will be construed narrowly.’”4 As “the FAA narrowly
restricts judicial review of arbitrators’ awards,”5 “[a] reviewing court examining
whether arbitrators exceeded their powers must resolve all doubts in favor of
1
Apache Bohai Corp. LDC v. Texaco China BV, 480 F.3d 397, 401 (5th Cir. 2007)
(internal quotation marks omitted) (quoting Brook v. Peak Int’l, 294 F.3d 668, 672 (5th Cir.
2002)).
2
Id. (quoting Delta Queen Steamboat Co. v. AFL-CIO, 889 F.2d 599, 604 (5th Cir.
1989)).
3
Id.4
Id. at 402 (quoting Action Indus., Inc. v. U.S. Fid. & Guar. Co., 358 F.3d 337, 343 (5th
Cir. 2004)).
5
Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 280 (5th
Cir. 2007) (en banc).
9
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arbitration.”6 The award should be confirmed if the arbitrator is arguably acting
within the scope of his authority.7
The Plan requires that the arbitration be “administered by the [AAA]
under its then-current National Rules for the Resolution of Employment
Disputes . . . before an arbitrator from the [AAA].” It is at best ambiguous
whether this language requires that an arbitrator who was on the Roster
throughout the duration of the arbitration proceedings also be on the Roster at
the time he enters the award. The plain terms require merely that the
arbitration be administered by an arbitrator from the AAA.
The meaning of the phrase “an arbitrator from the [AAA]” does not clearly
require that an arbitrator selected from the Roster remain on that Roster until
after the arbitrator’s decision is issued. The phrase could reasonably be
interpreted to require that the arbitrator be selected pursuant to the AAA’s
rules. It is far from clear that this provision states a limitation on the authority
of the arbitrator in the unexpected event that he is removed from the Roster
after the arbitration proceedings have concluded.8
Even if P.A.M. is correct that “an arbitrator from the [AAA]” specifies
ongoing qualification requirements rather than a selection method, it has still
failed to demonstrate that “an arbitrator from the [AAA]” means exclusively an
6
Apache Bohai, 480 F.3d at 402 (quoting Action Indus., 358 F.3d at 343).
7
Teamsters Local No. 5 v. Formosa Plastics Corp., 363 F.3d 368, 371 (5th Cir. 2004).
8
See Zeiler v. Deitsch, 500 F.3d 157, 166–167 (2d Cir. 2007) (concluding that an
arbitration agreement that specifically listed three arbitrators who were to compose the
arbitration panel did not “state a limitation on the authority of the panel to continue in the
unexpected event that one of the members might resign”); but see El Vocero De Puerto Rico v.
Union De Periodistas, 532 F. Supp. 13, 14–16 (D.P.R. 1981) (concluding, after considering
extrinsic evidence to ascertain the parties’ intent, that the parties agreed that the arbitrator
be an employee of the Conciliation and Arbitration Bureau and that this presupposed that the
requirement be maintained at all pertinent times because it would be illogical to insist on this
matter at the time of selection but not at “such important occasions as when [the arbitrator]
weighs the evidence, makes up his mind and issues his award”).
10
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arbitrator listed on the Roster. The phrase could also be understood to require
that the arbitrator’s continued assignment to this particular arbitration be
sanctioned by the AAA, and P.A.M. has presented no evidence that removal from
the Roster automatically means that the AAA no longer sanctions the
arbitrator’s continued service on previously appointed panels.9 In fact, the
AAA’s Roster management practices indicate that the Roster is primarily used
for future arbitration assignments. The AAA rotates arbitrators off the Roster
regularly for a variety of reasons,10 some of which have nothing to do with the
particular arbitrator but rather respond to regional needs or involve the need for
arbitrators with a focus in a particular area of law.
The Plan expressly incorporates the rules of the AAA. This court has
previously held, in addressing an arbitrator’s qualification under NASD rules,
that “[i]n the absence of a specific agreement to the contrary, determining [an
arbitrator’s] qualifications and eligibility is a matter left to the NASD.”11 The
AAA’s Rules provide that disqualification decisions are at its discretion.12
9
See United Transp. Union v. Gateway W. Ry. Co., 284 F.3d 710, 713 (7th Cir. 2002)
(suggesting that the National Mediation Board could remove an arbitrator from its Roster
while not removing him from any existing panels).
10
According to the AAA, an arbitrator may be removed for various reasons, including:
(1) career change requiring resignation; (2) failure to meet all training requirements;
(3) unsuccessful participation or performance in training programs; (4) a dearth of cases in the
arbitrator’s area of expertise or geographical location; (5) unprofessional conduct; (6) failure
to make appropriate and sufficient disclosures on a case; (7) failure to manage the arbitration
process effectively and efficiently; (8) higher fees or inconsistent billing practices; and
(9) failure to act in accordance with AAA Rules and procedures. India Johnson, Reality vs.
Myth: The Truth About Management of the AAA Commercial Roster (March 2003),
http://www.adr.org/si.asp?id=3523.
11
Bulko v. Morgan Stanley DW Inc., 450 F.3d 622, 626 (5th Cir. 2006).
12
See American Arbitration Association, Employment Arbitration Rules and Mediation
Procedures, Rule 16(b) (July 1, 2006), http://www.adr.org/sp.asp?id=36105 (“Upon objection
of a party to the continued service of an arbitrator, or on its own initiative, the AAA shall
determine whether the arbitrator should be disqualified under the grounds set out above, and
shall inform the parties of its decision, which decision shall be conclusive.”).
11
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Because the Plan does not clearly speak to this specific situation, the AAA’s
Rules are relevant.13 Under the AAA’s Rule 12(b), the arbitrator must be
qualified when designated.14 Rule 16, in turn, lists the grounds for
disqualification, which include: (1) partiality or lack of independence;
(2) inability to perform duties with diligence and in good faith; and (3) any other
grounds provided by applicable law.15 Notably, removal from the Roster alone
is not an available ground for disqualification of a previously appointed
arbitrator. Accordingly, P.A.M. has not demonstrated that the arbitrator was
not sanctioned by or “from the [AAA]” at the time he entered the award, even if
he was removed from the Roster. The AAA’s refusal to rule on the matter
further supports this conclusion.
13
Id. Rule 1 (“The parties shall be deemed to have made these rules a part of their
arbitration agreement whenever they have provided for arbitration by the American
Arbitration Association . . . .”).
14
Id. Rule 12(b).
15
Id. Rule 16(a).
12