CHRISTIAN S. GHERARDI, Plаintiff-Appellant, versus CITIGROUP GLOBAL MARKETS INC., Defendant-Appellee,
No. 18-13181
United States Court of Appeals for the Eleventh Circuit
September 17, 2020
D.C. Docket No. 1:18-cv-20969-UU
[PUBLISH]
Appeal from the United States District Court for the Southern District of Florida
Before MARTIN, GRANT, and LAGOA, Circuit Judges.
Christian Gherardi won a substantial arbitration award against his former employer, Citigroup Global Markets. Unhappy with its loss, Citi sought vacatur in federal court. Citi argued that because Gherardi had been an at-will employee, the arbitrators exceeded their powers by finding that he had been wrongfully terminated. The district court agreed. Gherardi‘s appeal presents two questions of contract interpretation. First, did the parties agree to arbitrate wrongful termination disputes? Seсond, was Gherardi a purely at-will employee,
I.
For roughly two decades, Christian Gherardi was a Miami-based broker and investment advisor for Citi. By all accounts, he was a star performer. Over the last five years of his employment, Gherardi never earned less than $750,000. But despite his financial success, Gherardi had a few problems at the office.
According to Citi, Gherardi engaged in “inappropriate and abusive behavior towards colleagues.” In June of 2015, Gherardi received a “final warning” letter reprimanding him for an incident where he was “aggrеssive towards a fellow employee and shouted profane language.” Some five months later, Gherardi emailed Citi‘s Human Resources Department threatening to challenge the warning letter in arbitration. Citi fired him some three days later.
Gherardi initiated arbitration against Citi. He argued that because Citi feared that he would join a competitor firm—and take his 500–600 clients with him—it tried to make him unemployable by firing him “for cause.” Among other things, Gherardi brought claims for defamation based on Citi‘s explanation of termination, wrongful termination in violation of the anti-retaliation provision, and wrongful termination in violation of “the common law of securities arbitration, which provides that registered persons are not at-will employees.” He sought $16.5 million in damages.
At the time of Gherardi‘s termination, he and Citi were parties to three relevant agreements: the 2015 Citi U.S. Employee Handbook, an Employment Arbitration Policy (appended to the Handbook), and a Dual Employment Agreement. Within these three agreements, five provisions are especially relevant:
- First, the Dual Employment Agreement said that Gherardi was an at-will employee. This meant that his employment could be “terminated at any time and for any reason or no reason, not otherwise prohibited by law, by any party.”
- Second, the Handbook noted that “[e]xcept for the Employment Arbitration Policy, nothing contained in this Handbook, nor the Handbook itself, is a contract of employment.”
- Third, the Arbitration Policy required “all employment-related disputes” between Gherardi and Citi to be arbitrated “under the auspices of the Financial Industry Regulatory Authority, Inc.”
- Fourth, the Arbitration Policy said that it did not “constitute, nor should it be construed to constitute, a waiver by Citi of its rights under the ‘employment-at-will’ doctrine nor” did “it afford an employee or former emplоyee any rights or remedies not otherwise available under applicable law.”
- Fifth, the Arbitration Policy stated that “[r]etaliation against employees who file a claim under this Policy,
including claims regarding the validity of this Policy or any provision thereof, is expressly prohibited.”
The arbitration panel unanimously awarded Gherardi nearly $4 million, including $3,452,000 as compensatory damages for wrongful termination. The panel did not make specific findings or explain its reasoning, but it was not legally required to do so. Gherardi moved to confirm the award in federal district court. Citi opposed confirmation and moved to vacate.1 The district court granted Citi‘s motion to vacate with respect to the wrongful termination portion of Gherardi‘s award. This appeal followed.
II.
The district court determined that the arbitrators “exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”
III.
A.
Litigation is our default adjudicative process, but it is not the only possible process. Private arbitration has existed at least since the Roman Empire. See Pandeсts of Justinian, Bk. 4, Title 8. In the United States, though arbitration has long been available, we have historically seen “widespread judicial hostility to arbitration agreements.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see, e.g., The Atlanten, 250 F. 935, 937 (2d Cir. 1918), decree aff‘d, 252 U.S. 313, 316 (1920) (breach of arbitration agreement results in nominal damages); Wood v. Lafayette, 46 N.Y. 484, 489–90 (N.Y. 1871) (arbitration agreement can be unilaterally revoked); Taylor v. Sayre, 24 N.J.L. 647, 650 (N.J. 1855) (courts can correct an arbitrator‘s legal error). Eventually, the political branches tired of the courts’ uneven enforcement practices. In 1925, Congress passed the Federal Arbitration Act, which said that written arbitration contracts were “valid, irrevocable, and enforceable.”
Under the FAA, federal courts have limited authority to vacate or modify an arbitration award.2 Vacatur is allowed “only in very unusual circumstances,” and those “very unusual circumstances” are described in the statute.3 First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995). The first three—corruption or fraud, bias, and procedural misconduct—are not at issue in this appeal. See
Following Supreme Court precedent, we have interpreted
This rule can be a tough pill to swallow for a losing party subjected to what seems like a legally questionable interpretation. And courts are understandably protective of our interpretative authority. But we have good reason to defer to the arbitrator‘s reasoning, even when it is different than our own. Arbitration agreements are contracts where the bargain is for the arbitrator‘s construction of the underlying agreements, rather than for any particular outcome. See Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013); United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 599 (1960).
So if even serious interpretive error does not justify vacatur under
As these examples show, a motion under
Our “sole question” under
Our respect for arbitration (a respect that is demanded by the FAA) means that some interpretive errors will go uncorrected. But if it were any other way, the efficiency gains of arbitration would be destroyed and arbitration would become “merely a prelude to a more cumbersome and time-consuming judicial review process.” Hall St. Assocs., 552 U.S. at 588 (citation omitted). When parties choose arbitration, we cannot override their decision by prioritizing our own answer over that of the arbitrator they selected. And we are called to accept that the costs of allowing interpretive errors to stand are “far outweighed by the general benefits that accrue . . . from giving arbitral awards a strong presumption of finality.” Wallace v. Civil Aeronautics Bd., 755 F.2d 861, 864 (11th Cir. 1985).
B.
These principles underlying
This is not a case where the arbitrators flagrantly defied the terms of the parties’ contract. The Dual Employment Agreement, of course, said that Gherardi could be “terminated at any time and for any reason or no reason.” So one question for the arbitrators was whether anything in the Arbitration Policy called that otherwise clear language into question. Gherardi argues yes: he says the Arbitration Policy‘s anti-retaliation provision created an exception to the background rule of at-will employment. Citi responds that any question about whether the anti-retaliation provision created an exception to the at-will nature of Gherardi‘s employment is answered on the previous page, which states that the Arbitration Policy “doesn‘t constitute . . . a waiver” of Citi‘s rights under the at-will doctrine.
The ordinary rule in contract interpretation is that an “interpretation giving reasonable meaning to all provisions of a contract is preferred to one which leaves a part useless or inexplicable.” In re FFS Data, Inc., 776 F.3d 1299, 1304 (11th Cir. 2015) (citation and quotation marks omitted); see also Restatement (Second) of Contracts § 202, comment d (1980) (“Where the whole can be read to give significance to each part, that reading is preferred.“). The arbitrators may have thought it implausible that the anti-retaliation provision was intended only as aspirational language. Cf. Wiregrass, 837 F.3d at 1088–89 (arbitrators are empowered to find implied terms in a contract, even if they seem to contradict the contract‘s express terms). The district court obviously thought not. But the legal merits of the dispute were the arbitrators’ concern, not the district court‘s or ours.
We offer the brief merits evaluation above only to illustrate that the contract language was “open to interpretation.” Wiregrass, 837 F.3d at 1088. Because the dispute‘s resolution was contractually assigned to the arbitrators and they arguably cоnstrued the contract, that is enough. As Gherardi correctly points out, Citi‘s argument boils down to a claim “that the arbitrators misinterpreted the governing contract.” This is a far cry from a valid claim that the arbitrators “exceeded their powers.”
* * *
In valid arbitration agreements, the parties opt out of the public courts and delegate judgment to a private third party. The resulting decision binds all parties equally—employers and emрloyees, plaintiffs and defendants, winners and losers. Citi chose to sign an arbitration agreement with Gherardi. It must now live with the results.
REVERSED and REMANDED.
MARTIN, Circuit Judge, dissenting:
The Federal Arbitration Act (“FAA“),
I.
As the majority recounts, Mr. Gherardi was employed by Citi as a broker and investment advisor based in Miami for about two decades. Toward the end of his employment, Mr. Gherardi faced complaints about his inappropriate behavior. In June 2015, Citi gave him a “final warning” and reprimanded him for aggression toward a fellow employee. Five months later, Mr. Gherardi informed Citi‘s human resources department of his intention to challenge the warning letter in arbitration. Citi fired Mr. Gherardi three days after he gave this notice and before he could commence the threatened arbitration. Then Mr. Gherardi initiated arbitration proceedings to challenge, among other things, the termination itself.
The arbitration panel ultimately awarded Mr. Gherardi nearly $4 million, including $3,452,000 as compensatory damages for wrongful termination. Mr. Gherardi moved to confirm the award in federal district court. Citi opposed this motion and moved, in turn, to vacate the award.
The District Court vacated the award‘s grant of compensatory damages for wrongful termination. The District Court found that the arbitration panel acted outside of its authority under
A district court‘s finding that arbitrators “exceeded their powers” under
II.
The FAA permits a district court to vacate an arbitration award if it finds that “the arbitrators exceeded their powers, or so imperfectly exeсuted them that a mutual, final, and definite award upon the subject matter submitted was not made.”
The majority opinion sets out the two questions of contract interpretation presented by Mr. Gherardi‘s appeal. The first is whether the parties agreed to arbitrate wrongful termination disputes. The second is whether Mr. Gherardi was a purely at-will employee. I take these questions in turn.
A. The Parties Agreed to Arbitrate Employment Disputes
No one disputes that these parties agreed to arbitrate employment-related claims. At the time he was fired, Mr. Gherardi‘s employment with Citi was governed by the 2015 Citi U.S. Employee Handbook (the “Handbook“). The Handbook says “[t]his Handbook contains a policy that requires you and Citi to submit employment-related disputes to binding arbitration (see Appendix A).” Appendix A of the Handbook is the Employment Arbitration Policy, which mandates arbitration of “all employment-related disputes” under the auspices of the Financial Industry Regulatory Authority, Inc.
The majority opinion says all that is required of us is that we ask whethеr the parties agreed to arbitrate. And the majority never looks into whether the arbitration agreement limited the authority of the arbitrators in any other way. It is true, as the majority says, that “Gherardi‘s wrongful termination claim was ‘employment-related,’ so it was validly submitted to the arbitrators.” Maj. Op. at 9. But the question of arbitrability is distinct from the scope of arbitral powers under
I believe it is also our obligation to inquire into whether the Employment Arbitration Policy governing this dispute limited arbitral powers in deciding employment-related disputes. This inquiry requires us to assess, as the majority puts it, whether the arbitrators “violated the agreement to arbitrate.” Maj. Op. at 8 (quoting Wise v. Wachovia Sec., LLC, 450 F.3d 265, 269 (7th Cir. 2006) (quotation marks omitted)).
Two principles govern our examination of the extent of the arbitrators’ powers given by the parties’ arbitration agreement. The first principle is whether “the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.” Sutter, 569 U.S. at 569, 133 S. Ct. at 2068. “Only if the arbitrator acts outside the scope of his contractually delegated authority—issuing an award that simply reflects his own notions of economic justice rather than drawing its essence from the contract—may a court overturn his determination.” Id. (quotation marks omitted and alterations adopted).
The second principle is that “an arbitrator may not ignore the plain language of the contract,” such that “an arbitrator may not issue an award that contradicts the express language of the agreement.” Wiregrass, 837 F.3d at 1088 (quotation mаrks omitted and alterations adopted). “The arbitrator acts within her authority when she even arguably interprets a contract, and she exceeds her authority when she modifies the contract‘s clear and unambiguous terms.” Id.
Thus, I am required to examine the text of the parties’ arbitration agreement. See Paladino, 134 F.3d at 1061 (“The parties’ intent governs what claims are arbitrable, and we look to the wording of the clause itself, giving effect to every provision, to determine the intent.“). The Employment Arbitration Policy plainly says, under a section titled “Statement of Intent,” that the arbitration agreement does not “cоnstitute, nor should it be construed to constitute, a waiver by Citi of its rights under the ‘employment-at-will’ doctrine nor does it afford an employee or former employee any rights or remedies not otherwise available under applicable law.” Doc. 17-3 at 10.1 The question thus becomes what effect does Mr. Gherardi‘s (agreed upon) status as an employee-at-will have on the agreement to arbitrate employment-related claims.
I take the words of the Statement of Intent to mean exactly what they say. The agreement to arbitrate did not modify the at-will nature of Mr. Gherardi‘s employment. Sеe Paladino, 134 F.3d at 1058 (“[A]n interpretation which gives a reasonable, lawful and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect[.]” (quoting Restatement (First) of Contracts § 203(a) (1981)) (quotation marks omitted)); Goldberg v. Bear, Stearns & Co., 912 F.2d 1418, 1421 (11th Cir. 1990) (“When general propositions in a contract are qualified by the specific provisions, the rule of construction is that the specific provisions in the agreement control.“). Thus, if arbitrators decided, in disregard of the parties’ agreement, that Mr. Gherardi was not an at-will employee, such a decision would amount to a “mоdifi[cation]” of the “clear and unambiguous terms” the arbitration agreement. Wiregrass, 837 F.3d at 1088.
And that is exactly what happened here. The arbitration panel awarded Mr. Gherardi compensatory damages for wrongful termination, which is not a form of relief available to at-will employees. See, e.g., Walton v. Health Care Dist. of Palm Beach Cty., 862 So. 2d 852, 855 (Fla. Dist. Ct. App. 2003) (“[A]n ‘at will’ employee . . . can be terminated for any or no reason and, thus, as a matter of law c[an] not state a cause of action for wrongful termination.“).2
Our circuit‘s analysis in Paladino is instructive in understanding why the arbitration
damages. Id. at 1057–60. In light of Paladino, I say the more specific term in the Employment Arbitration Policy, declaring Mr. Gherardi‘s at-will status, gave the arbitrators no power to modify his status even as it was deciding employment-related disputes. I reject the majority‘s conclusion that the parties’ agreement to arbitrate job-related grievances impliсitly gave the arbitrators power to invalidate other terms of Mr. Gherardi‘s employment contract.
B. Mr. Gherardi‘s Employment Was At-Will
As set out above, the arbitration agreement explicitly recognizes Citi‘s rights as an at-will employer. Nevertheless, the majority appears to give credence to an argument offered by Mr. Gherardi as a plausible alternative reading of his agreement that would allow the wrongful termination damages award.
Mr. Gherardi argues the arbitration panel could have concluded that the Employment Arbitration Policy‘s prohibition of retaliation against employees who file an arbitration claim created an exception to the background rule of at-will employment. There are at least a couple of reasons why I think it wrong to say that the anti-retaliation provision could have served as a basis for the arbitration award.
The Employment Arbitration Policy says “[r]etaliation against employees who file a claim under this Policy, including claims regarding the validity of this Policy or any provision thereof, is expressly prohibited.” So Mr. Gherardi argues the arbitrators may have awarded him damages for wrongful termination under the theory that he was fired in retaliation for initiating arbitratiоn. Unfortunately for Mr. Gherardi, however, the facts do not line up in support of his theory. Mr. Gherardi notified Citi of his intention to dispute its final warning on December 10, 2015. And email records show that the disciplinary committee already voted to fire Mr. Gherardi the day before, on December 9, 2015. Given that Citi‘s decision to fire Mr. Gherardi had already been made at the time he announced his decision to arbitrate, Citi‘s decision to fire him could not have been motivated by retaliation. And another problem for Mr. Gherardi with his retaliation claim is that he only relied on the anti-retaliation provision of the contract in thе context of his breach of contract claim. He did not reference this provision in making his wrongful termination argument to the arbitrators. To the extent that the majority credits the arbitration panel with having relied on a rationale neither supported by the facts presented to it nor offered by the parties before it, the opinion goes too far. The anti-retaliation provision simply cannot explain the arbitrators’ award.3
damages award to Mr. Gherardi. See Wiregrass, 837 F.3d at 1088 (stating that an award that “contradicts the express language of the agreement” may be vacated under
The majority emphasizes that a losing party must accept an arbitration award based even on “a legally questionable interpretation,” and that “even serious interpretive error does not justify vacatur under
* * *
The FAA is “motivated, first and foremost, by a congressional desire to enforce agreements into which parties ha[ve] entered.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 220, 105 S. Ct. 1238, 1242 (1985). Bеcause the arbitrators here exceeded their powers under the arbitration agreement, I would affirm the District Court‘s vacatur of the award under
Respectfully, I dissent.
Notes
- The Dual Employment Agreement states that Mr. Gherardi was an at-will employee, which meant that his employment could be “terminated at any time and for any reason or no reason, not otherwise prohibited by law, by any party.”
- The Employee Handbook noted that “[e]xcept for the Employment Arbitration Policy, nothing contained in this Handbook, nor the Handbook itself, is a contract of employment. . . . Your employment with Citi is at-will, which means it can be terminated by you or Citi at any time, with or without notice . . . .”