Whitehead Ex Rel. Estate of Whitehead v. Pullman Group, LLC
811 F.3d 116
3rd Cir.2016Background
- In May 2002 Pullman obtained an exclusive option to buy song catalogs from songwriters John Whitehead and Gene McFadden after a 180‑day due‑diligence period; disputes were to be resolved by arbitration in New York under AAA rules.
- Pullman claims tax liens found during due diligence led Whitehead and McFadden to refuse to consummate the sale after oral communications; he says he notified them by phone that his investigation was complete but did not provide written notice.
- Whitehead and McFadden died in 2004 and 2006; their estates later negotiated a $4.4 million sale to Warner Chappell, which fell through after Pullman disclosed the 2002 agreement.
- The Estates sued Pullman (tort and declaratory relief); Pullman counterclaimed for breach. The parties agreed to arbitrate and a three‑arbitrator panel heard the case.
- The panel found the 2002 agreement valid but ruled Pullman failed to prove he had notified the songwriters that due diligence was complete, so his option lapsed; it dismissed the claims and issued a final award.
- Pullman moved in district court to vacate the award, arguing the panel misapplied New York’s Dead Man’s Statute and thereby refused to hear material evidence; the district court denied relief and Pullman appealed.
Issues
| Issue | Pullman’s Argument | Estates’ Argument | Held |
|---|---|---|---|
| Whether arbitrators’ application of NY Dead Man’s Statute deprived Pullman of a fair hearing by excluding testimony about oral communications with the decedents | Arbitrators’ ruling effectively prevented Pullman from proving he notified the decedents, making it impossible to win and warranting vacatur | Panel reasonably limited weight of self‑serving oral testimony by decedents’ interlocutor; applying NY evidentiary rule in NY arbitration was foreseeable | Even if panel erred, mere legal error does not justify vacatur; no deprivation of a fair hearing found |
| Whether the FAA permits vacatur for refusing to hear pertinent evidence under 9 U.S.C. § 10(a)(3) | The panel’s treatment of testimony amounted to refusing to hear material evidence under §10(a)(3) | Error (if any) was not so prejudicial as to constitute refusal to hear material evidence or fundamental unfairness | Arbitrators’ conduct did not meet the high threshold for vacatur under §10(a)(3) |
| Whether the Estates opened the door to testimony, waiving the Dead Man’s rule | Opening the door meant the panel could not then discount or exclude Pullman’s testimony about oral communications | Panel warned it would "filter out" inadmissible testimony and thus neutralized any opening by the Estates | Court rejects Pullman’s ‘‘opened the door’’ claim; panel’s filtering meant no unfair tactical advantage existed |
| Whether the panel’s actions constitute "manifest disregard of the law" | The panel manifestly disregarded NY law by applying the Statute in a way that eviscerated Pullman’s proof | Even assuming the standard survives, manifest disregard requires ignoring clearly governing law; no such conduct occurred here | No manifest disregard; the standard (if applicable) not met — arbitrators acted within reasonable legal bounds |
Key Cases Cited
- Poslock v. Teachers’ Ret. Bd. of Teachers’ Ret. Sys., 666 N.E.2d 528 (N.Y. 1996) (discusses scope of Dead Man’s Statute)
- In re Wood’s Estate, 418 N.E.2d 365 (N.Y. 1981) (explaining purpose and text of Dead Man’s Statute)
- Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA’s vacatur grounds are exclusive)
- Newark Stereotypers’ Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594 (3d Cir. 1968) (legal error must deprive party of a fair hearing to justify vacatur)
- Teamsters Local 312 v. Matlack, Inc., 118 F.3d 985 (3d Cir. 1997) (procedural irregularities must produce fundamental unfairness to permit vacatur)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (declines to resolve continued vitality of manifest disregard)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418 (6th Cir. 1995) (defines manifest disregard as ignoring clearly governing precedent)
- Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930 (2d Cir. 1986) (illustrative manifest‑disregard discussion)
- Dluhos v. Strasberg, 321 F.3d 365 (3d Cir. 2003) (describes manifest disregard as an extremely deferential standard)