926 F. Supp. 2d 532
D. Del.2013Background
- Provost and Intrafusion sold Provost's company intraFUSION to Intrafusion and others under a Unit Purchase Agreement (UPA) dated July 15, 2008.
- UPA defined EBITDA during the 12-month Performance Period; Provost disputed Intrafusion's EBITDA and provided his own calculation.
- Disputes were submitted to arbitration; Deloitte LLP conducted conflicts checks and proposed an arbitrator, Gerald L. Yarnall.
- Arbitrator Yarnall issued a June 1, 2012 award denying a Performance Payment/Bonus to Provost.
- After the Award, Provost requested further disclosure of potential conflicts; the Arbitrator did not respond.
- Provost moved to vacate under 9 U.S.C. §10 and Intrafusion cross-moved to confirm; the court denied vacatur and granted confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether undisclosed conflicts require vacating the award | Provost argues personal and business conflicts show partiality | Intrafusion contends conflicts are remote or non-partial | No evident partiality; conflicts too remote to vacate |
| Whether discovery into asserted conflicts should be allowed | Provost seeks discovery to develop parol evidence of conflicts | Discovery would be futile; conflicts remote | Discovery denied; conflicts remote and trivial |
| Whether Provost waived challenges to conflicts | Provost timely objected post-award; waiver not applicable | Provost waived by agreeing to Deloitte's conflicts process | Waiver issue not reached; merits fail |
| Whether the court should vacate for evident partiality based on indirect connections | Indirect Deloitte relationships imply bias in arbitrator | No reasonable impression of partiality from indirect ties | No bias shown; no vacatur |
| Whether the arbitrator exceeded authority or refused to hear material evidence | Discovery and parol evidence should be considered | Award based on four corners of UPA; no error | No excess of power; award confirmed |
Key Cases Cited
- Lyeth v. Chrysler Corp., 929 F.2d 891 (2d Cir.1991) (limits on discovery in arbitration bias claims)
- Kaplan v. First Options of Chi., Inc., 19 F.3d 1503 (3d Cir.1994) (evident partiality standard requires bias strong enough for a reasonable person to question)
- Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 (7th Cir.1983) (disfavoring broad discovery in arbitration bias claims)
- Stone v. Bear, Stearns & Co., Inc., 872 F. Supp. 2d 435 (E.D. Pa.2012) (courts resist unwarranted discovery in arbitration bias)