440 F. App'x 612
10th Cir.2011Background
- Abbott and Mulligan, Fen-Phen litigations lawyers, formed an Agreement in 2001 to jointly handle Fen-Phen clients eligible for settlement benefits or opt-outs.
- Abbott served as Consulting Attorney; his duties included advertising, screening, and initial client work; fees varied by who paid initial costs.
- The arbitration panel found the Agreement intended exclusivity and awarded Mulligan nearly $8.2 million plus arbitration fees after Abbott was found to have self-dealt by retaining/referring clients improperly.
- Abbott argued the panel exceeded its authority by awarding gross profits rather than net profits under Utah law and that exclusivity violated ethical/public policy rules.
- The district court denied Abbott’s motion to vacate and Mulligan’s motion to confirm; Abbott appealed, raising manifest disregard, irrationality, and public policy arguments.
- On appeal, the panel’s decision was reviewed under the FAA with deference; the court ultimately affirmed the arbitration award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the panel manifestly disregarded Utah law | Abbott argues the panel awarded gross profits contrary to Utah net-profit rule. | Mulligan contends manifest disregard standard governs under Hall Street and allows deference to contract interpretation. | No manifest disregard; panel's damages basis supported by contract. |
| Whether the panel lacked a rational basis for the damages | Abbott claims the award overstates damages given costs and work performed by Mulligan. | Mulligan argues damages follow contract terms and alternative arguments support gross profits. | Panel had a contractual basis; not irrational under FAA standards. |
| Whether the exclusive referral aspect violated public policy | Abbott contends exclusive referral contracts violate ethical rules and public policy. | Mulligan defends exclusivity as the intended contract under the Agreement and within permissible scope. | Waived; public policy argument not preserved below; even if reached, panel reasonably construed contract to avoid ethical issues. |
| Whether the FAA grounds for vacatur are exclusive post-Hall Street | Abbott seeks vacatur under manifest disregard and related theories. | Mulligan urges adherence to Hall Street and the FAA-listed grounds. | FAA grounds are exclusive; manifest disregard remains nonessential as to outcome here, but not needed to vacate. |
Key Cases Cited
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (Supreme Court 2008) (FAA grounds for vacatur are exclusive)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (Supreme Court 2010) (arbitration exceeded powers; class arbitration under silent contract)
- ARW Exploration Co. v. Aguierre, 45 F.3d 1455 (10th Cir. 1995) (manifest disregard defined as willful inattentiveness to governing law)
- Jenkins v. Prudential-Bache Secs., Inc., 847 F.2d 631 (10th Cir. 1988) (manifest disregard precedent prior to Hall Street)
- Sawyers v. FMA Leasing Co., 722 P.2d 773 (Utah 1986) (net profits rule; damages require reasonable certainty)
- TruGreen Cos., L.L.C. v. Mower Bros., Inc., 199 P.3d 929 (Utah 2008) (damages basis and expectation interest under Utah law)