Raymond Winfrey v. Simmons Foods

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 06-3353
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Raymond Winfrey; Richard Jones; *
Cathy Jones; Lonnie Osman; Dewey *
Drummond; Connie Drumond; *
Mark Pense; Shalane Pense; Gerald *
Provence; Denise Provence; Dwain *
Kelly, *
* Appeal from the United States
Appellees, * District Court for the
* Western District of Arkansas.
v. *
*
Simmons Food, Inc., *
*
Appellant. *
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Submitted: June 11, 2007
Filed: July 19, 2007
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Before LOKEN, Chief Judge, ARNOLD and COLLOTON, Circuit Judges.
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ARNOLD, Circuit Judge.
Simmons Foods appeals the order of the district court1 confirming an arbitration
award against it in a dispute with its poultry growers. The district court rejected
1
The Honorable Robert T. Dawson, United States District Judge for the Western
District of Arkansas.
Simmons’s petition to vacate the award under 9 U.S.C. § 10(a)(2) for arbitrator bias.
We affirm.
I.
A group of poultry growers that included Raymond Winfrey sued Simmons for
damages under the Packers and Stockyards Act, see 7 U.S.C. § 192(a). The district
court ordered the parties to submit to arbitration in accordance with the arbitration
clause in their contract. That clause provided among other things, that "each party
shall appoint one arbitrator" and that these arbitrators "shall jointly appoint a third
arbitrator."
Consistent with the agreement, the growers selected J. Dudley Butler as their
party-appointed arbitrator and Simmons selected Frank Hamlin. More than nine
months later, Simmons first raised an objection to Mr. Butler’s selection on the ground
that he was biased, and it later moved the district court for an order removing him
from the arbitration panel. The court denied the motion, ruling that the issue was for
the panel to decide in the first instance, and it ordered the parties to proceed with
arbitration. Simmons later learned that Mr. Butler had previously represented the
poultry growers in litigation against poultry companies and had testified on behalf of
growers before a subcommittee of the United States Senate.
Before arbitration of the dispute began, Simmons substituted John Everett for
Mr. Hamlin as its party arbitrator. Mr. Butler and Mr. Everett then selected
Mr. Hamlin as the third arbitrator. The arbitration panel twice rejected Simmons's
allegation that Mr. Butler should be removed because of bias. The panel concluded
that the arbitration clause did not require the party-selected arbitrators to be neutral
and that the arbitrators were "properly appointed pursuant to the arbitration clause in
question and [were] qualified to serve and decide all issues in this matter."
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After a hearing, the arbitrators unanimously awarded the poultry growers
$510,000 in damages. The growers petitioned the district court to confirm the award,
and Simmons moved to vacate it on the grounds of Mr. Butler's alleged bias and
failure to disclose his connections with the growers. The district court confirmed the
award and entered judgment for the growers on the award.
II.
We review the district court's factual findings for clear error and its holdings of
law de novo. Schoch v. InfoUSA, Inc., 341 F.3d 785, 788 (8th Cir. 2003), cert. denied,
540 U.S. 1180 (2004). Our review is restricted by the great deference accorded
arbitration awards. "The award must be confirmed so long as the arbitrator 'is even
arguably construing or applying the [agreement]' even if the court thinks that his
interpretation of the agreement is in error." United Food & Commercial Workers'
Union Local 655 v. St. John's Mercy Health Sys., 448 F.3d 1030, 1032 (8th Cir. 2006)
(quoting United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 38 (1987))
(alteration in United Food).
Simmons argues that the district court should have vacated the award under the
Federal Arbitration Act's provision that allows a court to vacate an award where one
or more arbitrators had "evident partiality," 9 U.S.C. § 10(a)(2). We disagree: Where
an agreement entitles the parties to select interested arbitrators, "evident partiality"
cannot serve as a basis for vacating an award under §10(a)(2) absent a showing of
prejudice.
As we have observed in a previous case, the "parties to an arbitration choose
their method of dispute resolution, and can ask no more impartiality than inheres in the
method they have chosen." Delta Mine Holding Co. v. AFC Coal Properties, 280 F.3d
815, 821 (8th Cir. 2001) (internal quotations marks and citation omitted), cert. denied,
537 U.S. 817 (2002). "[W]here the parties have expressly agreed to select partial party
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arbitrators, the award should be confirmed unless the objecting party proves that the
arbitrator's partiality prejudicially affected the award." Id.
The arbitration panel twice concluded that the party's arbitration contract did not
require the party's selected arbitrators to be neutral. Because "contract interpretation
is left to the arbitrator," Inter-City Gas Corp. v. Boise Cascade Corp., 845 F.2d 184,
187 (8th Cir. 1988), the district court should defer to that interpretation "so long as the
arbitrator is even arguably construing or applying the contract." Schoch, 341 F.3d at
788 (internal quotations and citations omitted).
The district court did not err in deferring to the arbitration panel's interpretation
of the contract because this interpretation is consistent with the text of the agreement.
The contract provides for a tri-partite arrangement under which each party selects one
arbitrator. The contract does not require a party-selected arbitrator to be neutral. It
also does not mandate disclosures or provide either party the right to strike the other's
appointed arbitrator. Furthermore, the parties signed an addendum to the contract that
also contains no neutrality requirement for the party-appointed arbitrators. Tellingly,
it designates Mr. Hamlin as the sole "neutral" arbitrator.
Simmons's actions, moreover, are consistent with the arbitration panel's
interpretation of the contract. Simmons's legal counsel referred to the third arbitrator
(but to neither of the party-selected arbitrators) as "neutral" in a letter that he sent.
Simmons did not object to Mr. Butler's selection or request any disclosures from him
when he was initially selected or for almost eleven months thereafter.
Further, as Mr. Hamlin (the neutral arbitrator) stated, it is industry custom that
party arbitrators are frequently not required or expected to be neutral for ruling on
disputes. In a letter to counsel for both parties (written while he was Simmons's party
arbitrator), he asserted that "when a clause is normally drafted in this manner, each
party is most likely to select someone that ... might see the case a little more from the
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perspective of the party that appointed the Arbitrator." See also Sphere Drake Ins. Ltd.
v. All American Life Ins. Co., 307 F.3d 617 (7th Cir. 2002), cert. denied, 538 U.S. 961
(2003).
Simmons argues that Mr. Butler's failure to disclose the extent of his relationship
with the growers creates an impermissible appearance of bias, thus requiring that the
award be vacated. We disagree. There is no requirement that party-appointed
arbitrators make any disclosures to the parties. Simmons mistakenly relies on the
Supreme Court's decision in Commonwealth Coatings Corp. v. Continental Cas. Co.,
393 U.S. 145 (1968), which vacated an arbitration award because "the supposedly
neutral member" of a three-member arbitration panel failed properly to disclose his
business connections with one of the parties. Id. at 146, 150 (emphasis added). The
requirement that neutral arbitrators make disclosures does not extend to party-
appointed arbitrators. The other cases cited by Simmons in its brief for its argument
to the contrary are inapposite because none of them involves an arbitration provision,
such as the one in this case, that provides for partial, party-selected arbitrators. See,
e.g., University Commons-Urbana, Ltd. v. Universal Constructors, Inc., 304 F.3d
1331, 1334 (11th Cir. 2002); Schmitz v. Zilveti, 20 F.3d 1043, 1045 (9th Cir. 1994).
Even assuming that Mr. Butler exhibited "evident partiality," Simmons has the
burden under our case law to show that this partiality had a prejudicial impact on the
arbitration award. See Delta Mine, 280 F.3d at 821. Reviewing the issue de novo, we
agree with the district court's conclusion that Simmons failed to meet this burden.
Simmons presents no evidence indicating that Mr. Butler's partiality deceived or misled
the other two arbitrators, prejudiced Simmons's ability to present its case, or in any way
affected the award to which the arbitrators agreed unanimously. The mere possibility
of prejudice is insufficient to justify setting aside the award.
III.
For the reasons stated, we affirm the district court's decision.
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