Richard Brown v. Susan Brown-Thill
762 F.3d 814
| 8th Cir. | 2014Background
- Siblings Richard L. Brown and Susan Brown‑Thill were co‑trustees of the Eugene D. Brown Trust (EDB Trust); longstanding management disputes led them to sign a broad Arbitration Agreement (2010) covering trust, partnership, and estate tax disputes.
- Family entities included Brown Bear LLC (general partner) and two family limited partnerships (FLP I & FLP II); deadlock between co‑trustees prevented partnership distributions needed for tax/obligations.
- Cooper (trustee of the other trust) proposed an urgent Trust Funding Proposal; Brown objected and the matter went to arbitrator Richard McLeod, who issued a March 14, 2011 award approving distributions and ordering Brown to execute documents.
- Separately, Brown attempted a conditional resignation and unilateral successor appointment (Rubenstein); Brown‑Thill submitted removal and resignation issues to the arbitrator, producing a December 12, 2011 award declaring Brown’s attempted resignation ineffective and removing him as co‑trustee under statutory standards.
- Brown sought to vacate both awards in district court; the district court denied relief and also denied Brown‑Thill’s request for contractual attorneys’ fees for defending the vacatur actions. The Eighth Circuit affirmed with one narrow modification that did not change trust administration status.
Issues
| Issue | Plaintiff's Argument (Brown) | Defendant's Argument (Brown‑Thill / Arbitrator) | Held |
|---|---|---|---|
| Whether disputes were substantively arbitrable under the Arbitration Agreement | The submission procedures weren’t followed so particular disputes weren’t arbitrable | The Agreement was broad and covered all disputes between the parties in trustee/partner capacities | Held arbitrable: the Agreement broadly covered these matters; substantive arbitrability not for de novo review by court |
| Whether procedural prerequisites or arbitrator misconduct required vacatur (FAA §10(a)(2),(3),(4)) | Arbitrator had ex parte contacts, denied full hearing, exceeded procedural rules | Arbitrator had notice, held telephonic hearing, parties had opportunity to present objections; no evident partiality | Vacatur denied: no showing of evident partiality or deprivation of fair hearing; procedural rulings entitled to great deference |
| Whether arbitrator exceeded powers by removing trustee using statutory grounds (vs. contractual interpretation) | Removal was a judicial, statutory power; arbitrator exceeded authority by removing Brown based on statute and without joining all beneficiaries | The removal issue was submitted to arbitration; arbitrator could construe trust and consider statutory standards | Court: arbitrator could resolve contractual issues and consider statutory removal standards, but he exceeded his powers by performing the exclusively judicial act of removing Brown on statutory grounds; decision was remedy‑neutral because Brown’s December 2 unconditional resignation is now effective |
| Whether Brown‑Thill was entitled to contractual attorneys’ fees for defending vacatur actions | Arbitration Agreement allows recovery of costs/fees when a party pursues claims outside arbitration; she sought fees for defending vacatur suits | Confirmation/vacatur proceedings under FAA are part of the arbitration enforcement mechanism, not "other" proceedings | Denied: FAA §§9–11 make confirmation/vacatur part of enforcing awards; Agreement doesn’t authorize fees for FAA post‑award proceedings |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (threshold question of substantive arbitrability is for court unless parties assign it to arbitrator)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (procedural gateway questions are presumptively for the arbitrator)
- Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA §§10–11 provide exclusive statutory grounds for vacatur/modification)
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) (arbitral interpretation of contract stands if it is even arguably based on the contract)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010) (arbitrator exceeds submission when deciding based solely on statute rather than contract)
- Alexander v. Gardner‑Denver Co., 415 U.S. 36 (1974) (arbitrator exceeds scope when decision rests solely on interpretation of legislation rather than the contract)
- Medicine Shoppe Intern., Inc. v. Turner Inv., Inc., 614 F.3d 485 (8th Cir. 2010) (courts may not reconsider merits of arbitration award on error grounds)
- Tick v. Cohen, 787 F.2d 1490 (11th Cir. 1986) (beneficiaries generally are necessary parties in trustee removal actions)