MEMORANDUM OPINION AND ORDER
Plaintiffs, James Holden and Christine Holden (collectively, the “Holdens”), filed an action in this Court against Deloitte & Touche LLP (“Deloitte”), Jefferies & Company (“Jefferies”), EPS Solutions Corp. (“EPS”), and others in November 2000. The case was assigned to District Judge Robert W. Gettleman, and on June 1, 2001, Judge Gettleman issued a memorandum opinion and order compelling arbitration of the Holdens’ respective claims against De-loitte and Jefferies.
See Hoffman v. Deloitte & Touche LLP,
In January 2005, Deloitte filed a motion to confirm the Arbitration Award. (D.E.97.) The Holdens also filed an objection to confirmation and motion to vacate the Award, as well as a motion to reconsider Judge Gettleman’s arbitration order. (D.E.89.) For the reasons stated below, the motion to reconsider Judge Gettle-man’s order and objection to confirmation of the Arbitration Award are respectfully rejected. The motion to confirm the Arbitration Award is granted.
I. Background
The Holdens filed an action in this district court against Deloitte, Jefferies, EPS, and others in November 2000. The complaint alleges a complex fraudulent scheme conducted by Deloitte, Jefferies, and other named defendants acting in concert with them, to form and operate EPS. The complaint alleges that Deloitte, together with the other defendants, amassed stock to eash-in once EPS instituted its initial pub-lie offering (“IPO”). To raise funds, De-loitte and others allegedly sought to attract successful businesses to provide cash to keep EPS afloat until they could cash-in on the IPO. Specifically, the complaint alleges that Deloitte, acting in concert with the other defendants, induced the Holdens to sell their company to EPS, pursuant to a stock purchase agreement (the “SPA”), by making false statements about EPS’s financial future and publicizing the public offering, even though they knew that EPS was short $10 million in earnings before interest, taxes, depreciation and amortization (“EBITDA”) and in need of cash.
After the suit was filed, Deloitte and Jefferies each moved to stay the action, or in the alternative, for dismissal, and to compel arbitration pursuant to § 7.13 of the Stock Purchase Agreement (“SPA”) between EPS and the Holdens. Section 7.13 of the SPA provides in relevant part that:
(a)(i) Any controversy or claim arising out of or relating to this Agreement shall be solely and finally settled by arbitration administrated by the American Arbitration Association (the “AAA”)....
(D.E. 95, Ex. 1 (SPA § 7.13) (the “Arbitration Clause”).)
After extensive briefing from the parties with respect to the requested relief, on June 1, 2001, the Honorable Judge Robert W. Gettleman issued a memorandum opinion and order compelling arbitration of the Holdens’ claims against Deloitte and Jefferies.
See Hoffman v. Deloitte & Touche LLP,
Thereafter, on or about December 19, 2001, the Holdens entered into the Arbitration Agreement with Deloitte, Jefferies, and certain other named defendants. The Arbitration Agreement modifies the arbitration procedures set forth in § 7.13 of the SPA. For example, the agreement requires an arbitral panel consisting of three neutral arbitrators, rather than two party-selected arbitrators who thereafter would select the third member of the panel. (D.E. 98, Ex. 2 ¶ 4; see also id. ¶ 5 (specifying that the three neutral arbitrators shall each be “a practicing attorney or a retired or former judge with at least fifteen (15) years experience with and knowledge of securities law, complex business transactions, and mergers and acquisitions”).) The Arbitration Agreement also substantially expanded the scope of discovery available to the parties and the time period in which the parties and their counsel could complete such discovery. (Id. ¶¶ 7-9, 15.) 1 The parties also waived the right to seek attorneys’ fees based on any judgment, order, ruling, or award entered in the arbitration. (Id. ¶ 19.) The Arbitration Agreement also provides that, by “entering into this Agreement,” the Hol-dens “do not waive any objections to the [Arbitration Order].” (Id. ¶ 2.)
On December 20, 2001, the Holdens filed an arbitration demand with the American Arbitration Association. (D.E.97, Ex. F.) There were nineteen pre-hearing conferences held, with written orders resulting from each, between July 31, 2002 and June 8, 2004. (Award at 2.) The panel of three neutral arbitrators (the “Panel”) presided over an extensive evidentiary hearing with respect to the Holdens’ claims, which took place over fourteen days from June 18, 2004 to August 2, 2004.
(Id.)
The parties introduced testimony from over thirty witnesses (whether live or by deposition) and they introduced several hundred exhibits. At the conclusion of the arbitration, each party submitted seventy pages of post-hearing briefs and response briefs, and the parties orally argued their respective positions to the Panel.
(Id.)
Ultimately, on October 26, 2004, the Panel issued a ten-page statement of Awards and Reasons, in
Several months prior to issuing the Arbitration Award with respect to Deloitte, the same Panel dismissed Jefferies from the arbitration proceedings as a result of a settlement reached between the Holdens and Jefferies. The Holdens and Jefferies sought the assistance of the Panel and the district court in effectuating that settlement. (D.E.97, Ex. A.)
The case is currently before this Court on Deloitte’s motion to confirm the Arbitration Award. The Holdens have filed an objection to confirmation of the Arbitration Award, a motion to vacate the Arbitration Award, and a motion to reconsider Judge Gettleman’s Arbitration Order and to set the case for a jury trial. As explained below, the reconsideration motion concerning the Arbitration Order and motion to vacate the Arbitration Award are denied, and the motion to confirm the Award is granted.
II. Reconsideration of the Arbitration Order
A. Standard of Review
The Court first addresses the Holdens’ motion to reconsider Judge Gettleman’s June 2001 order finding that arbitration was appropriate (also, “Reconsideration Motion”). The Reconsideration Motion implicates two lines of teaching regarding the applicable standard of review by this Court.
First, under any circumstances, the appropriate scope for a reconsideration motion is a limited one. Precedent instructs that a motion to reconsider is appropriate only when the court has “patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension. A further basis for a motion to reconsider would be a controlling or significant change in the law or facts since the submission of the issue to the Court.”
Bank of Waunakee v. Rochester Cheese Sales, Inc.,
In addition, because of the particular procedural history of this case, which involves a transfer between district courts, a second line of authority is relevant and bears on the standard of review. Specifically, this case was originally before Judge Gettleman, and it came to this Court, along with a series of related cases, via reassignment in 2004 after this Court took the bench. Under such circumstances, the Holdens’ Reconsideration Motion implicates a “variant of the law of the case doctrine that relates to the re-examination of a prior ruling by a different member of the same court.... ”
Best v. Shell Oil Co.,
With the Seventh Circuit’s teachings in mind, the Court turns to the Holdens’ Reconsideration Motion. For the reasons stated, that motion is respectfully denied.
B. Analysis 2
The issue before Judge Gettleman was whether the fact that Deloitte is not a signatory to the SPA defeats its right to compel arbitration pursuant to the SPA’s Arbitration Clause. Because precedent teaches that analysis of such questions obviously depends on the specific facts presented by a case, the Court first describes the allegations of the Holdens.
Accord Grigson v. Creative Artists Agency, L.L.C.,
The operative complaint at the time the arbitration issue was briefed before Judge Gettleman alleged a “complex fraudulent scheme conducted by [Deloitte] and Jeffer-ies, and others acting in concert with them, to form and operate EPS.... ”
Hoffman,
More specifically, the complaint alleged that the coconspirators included Deloitte, Jefferies, EPS, and Christopher Massey— who was alleged to variously be a “senior partner” at Deloitte, as well as “CEO of EPS,” and, in fact, was alleged to hold both posts at the same time for a substantial period of the operative events.
(E.g., id.
¶
7.) The
defendants, including Deloitte, were alleged to have directed and controlled EPS (see id. ¶ 96 (alleging that Deloitte, Massey and the other defendants “conducted the business of EPS”), and the complaint further alleged that “each of the defendants ... drafted, reviewed, ratified, and/or approved the misleading statements, releases, and reports of and about EPS and its component parts” that the Holdens alleged were fraudulent. (Id. ¶ 100.)
4
These allegedly false statements included,
inter alia,
information that was attached as Schedule 3.6 and Exhibit B to the SPA.
(See, e.g., id.
¶ 69 (alleging that Deloitte and Massey “caused EPS to [falsely] represent to the Holdens in writing” certain financial information that was incorporated and contained in Schedule 3.6
The complaint alleges that “[Deloitte] and each of the defendants conspired with each other,” and identifies the goal of the conspiracy as,
inter alia,
inducing sellers like the Holdens to “sell their companies” to EPS, as was done for the Holdens via the SPA.
(Id.
¶ 114;
see also id.
¶ 90 (“Each of the predicate acts had the same purpose, to induce the business owners to sell their businesses to EPS; [and] the same participants, defendants herein”).)
7
The complaint sought over $110,000,000 for the Holdens, based in substantial part on the negotiated price and value purportedly reflected in the SPA.
(See, e.g., id.
¶¶ 80, 88 (claiming damages “to the Holdens of $110,000,000” based on,
inter alia,
“the EPS price of over $100 million” in the SPA).)
8
In fact, the Holdens sought to treble that figure pursuant to the RICO count, and claimed in excess of
2. Legal Analysis
a. The Holdens Do Not Make A Serious Claim That Reconsideration Relief Is Appropriate Under Applicable Standards
The Holdens’ Reconsideration Motion is denied for the threshold reason that they do not make a serious challenge that reversal is warranted under the demanding standards applicable to such motions, particularly in instances where the case has been transferred to a new district judge after the ruling in question was issued. The Holdens do not claim that Judge Get-tleman patently misunderstood them, or has made a decision outside the adversarial issues presented to the Court by the parties in connection with the various arbitration motions at play, or made an error not of reasoning but of apprehension. Furthermore, although the Holdens make some attempt to argue that decisions which were issued since Judge Gettleman’s ruling demonstrate the manifest nature of his error, the Holdens’ arguments, fairly construed, are that Judge Gettleman was wrong based on long-settled law, which is overwhelmingly the authority that the Hol-dens cite.
(See, e.g.,
Holden Mem. at 3 (“This was error because the Supreme Court has taught for years that....”); D.E. 101 (“Holden Reply”) at 3 (citing,
inter alia, Chiarella v. United States,
b. Judge Gettleman’s Ruling Appears Correct In Any Event
In addition, this Court declines to overturn Judge Gettleman’s Arbitration Order because it appears to be correct. As explained, Judge Gettleman ruled that the Holdens were required to arbitrate their claims on multiple, independent bases, including common law agency and related principles, equitable estoppel, and third-party beneficiary law.
Hoffman,
i. General Principles
As an initial matter, the parties disputed the relevance of the SPA’s choice of law clause, which provides that the agreement shall be governed by California law. (SPA at § 7.4.) The Holdens argued that California law should apply to the issue of whether non-parties can enforce the SPA’s Arbitration Clause, whereas Deloitte argued for application of federal law. Ultimately, Judge Gettleman concluded that state law was not relevant because there is no dispute regarding contract formation, validity, or interpretation, and federal substantive law governs the question of arbitrability.
Hoffman,
The Holdens argue, with considerable ardor, that Judge Gettleman erred because he should have looked to California law to determine this question. While the Hol-dens cite many California decisions about various legal principles, their research apparently did not uncover California appellate authority which expressly agreed with Judge Gettleman’s analysis on this matter and rendered a decision on that basis.
See Metalclad Corp. v. Ventana Envtl. Org. P’Ship,
Metalclad agreed to arbitration in the underlying written contract but now, in effect, seeks the benefit of that contract in the form of damages from Ventana while avoiding its arbitration provision. Estoppel prevents this.
Id.,
The Court will discuss later why, in its view at least, Judge Gettleman did not err in finding that the Holdens were required to arbitrate their claims. For present purposes, however, the salient point is that the Holdens’ repeated contention that Judge Gettleman erred by applying “federal cases under the FAA instead of state law to the question whether nonsignatory Deloitte could invoke the arbitration clause of the SPA” (Holden Mem. at 3) fails to acknowledge that California authority agrees with Judge Gettleman on this point. This agreement in California authority renders much of the Holdens’ extended discussions of other areas of California law effectively, with all respect, of limited, if any, relevance.
The Holdens also argue that the Supreme Court’s decision in
EEOC v. Waffle House,
Moreover, and independently, Waffle House dealt with a materially different factual scenario than the one presented here. Waffle House involved an attempt by a signatory defendant that was attempting to compel a plaintiff (and government regulator, the EEOC) to arbitration based on a contract that the regulator/plaintiff had never signed. This case, by way of contrast, deals with a non-signatory defendant seeking to compel a signatory plaintiff to arbitration. In addition, the allegations in this case contend: that Deloitte is part of an extensive conspiracy and racketeering scheme with the signatory defendant EPS (and therefore is putatively accountable to the Holdens on such basis for the acts of EPS); that various allegedly fraudulent statements were conveyed and contained in attachments to the SPA; and that the Holdens are entitled to hundreds of millions of dollars in damages based on the valuation numbers purportedly reflected in the SPA.
Federal courts have noted the distinction between this
setting
— i.e., where the non-signatory defendant is seeking to compel a signatory plaintiff to arbitration— and the one presented in
Waffle House,
and distinguished the case on that basis. For example, the First Circuit recently cited
Waffle House
for the general rule that “a contract cannot bind a non party” but stated there are exceptions to the rule, such as the estoppel theory that Judge Gettleman applied.
Medical Air Tech. Corp. v. Marwan Inv., Inc.,
This Court sees no basis to read Waffle House as displacing the long line of authority concerning third-party enforcement of arbitration clauses against signatories that is reflected in federal appellate cases such as MS Dealer (and upon which Get-tleman principally relied) and the California Court of Appeals’ decision in Metal-clad. 10 Accordingly, the Court proceeds to examine the various grounds on which Judge Gettleman concluded that the Hol-dens were required to arbitrate their claims against Deloitte.
ii. Equitable Estoppel
Judge Gettleman held that equitable estoppel principles directed that the
As Judge Gettleman found, this case falls within each of these categories of equitable estoppel.
Hoffman,
In addition, the Court agrees with Judge Gettleman that the Holdens’ claims “all
Under such circumstances, the Holdens are certainly not seeking some indirect benefit from, or making some indirect reference to, the SPA. Nor need arbitration be ordered simply because their claims contemplate that another contractual relationship might coincide with Deloitte’s alleged wrongs. Instead, a central goal of the alleged conspiracy and scheme was the effectuation of the SPA, in which multiple alleged fraudulent statements were made for which Deloitte is allegedly responsible, and by which the fraud was actually completed. In this case, the claims of the Holdens are intertwined with the SPA and the contents of it. Moreover, the Holdens seek to leverage the monetary terms of the SPA as the basis for their substantial damages claim. Under such circumstances, equitable estoppel, under considerable authority, is appropriate.
See, e.g., MS Dealer,
Like the
MS Dealer
court, the Court acknowledges that the Holdens cast their claims against Deloitte as tort claims rather than contract claims. “However, it is well established that a party may not avoid broad language in an arbitration clause by attempting to cast its complaint in tort rather than contract.”
iii. Agency Law and Related Principles
Judge Gettleman also found, independently, that the Holdens fairly were required to arbitrate their claims under agency and related principles.
See Hoffman,
Federal courts repeatedly have recognized that agency law and related principles can permit the enforcement of arbitration agreements by nonsignatories.
See Grigson,
The Holdens’ complaint was replete with allegations of concerted misconduct by De-loitte and the signatory EPS, as well as with allegations that Deloitte was acting on behalf of EPS.
See, e.g.,
D.E. 1 ¶ 69 (alleging that Deloitte and Massey “caused EPS to [falsely] represent to the Holdens in writing” certain fraudulent financial information that was embodied in,
inter alia,
Schedule 3.6 of the SPA);
id.
¶ 70 (similar);
id.
¶ 96 (alleging that Deloitte, Massey and the other defendants “conducted the business of EPS”);
id.
¶ 76 (alleging that Deloitte, Jefferies, Massey, and others “induced EPS to falsely represent” certain financial information about EPS);
id.
¶ 117 (alleging that Deloitte is liable for fiduciary breach “as both promoters of EPS and agents of the prospective investors, including the Holdens”);
id.
¶ 100 (alleging that “each of the defendants ... drafted, reviewed, ratified, and/or approved the misleading statements, releases, and reports of and about EPS and its component parts”);
id.
¶ 114 (alleging that “[Deloitte] and each of the defendants conspired with each other” and identifying as the goal of the conspiracy as inducing the Holdens, among others, to “sell their companies” to EPS, as the Holdens did by the SPA);
id.
¶ 102 (alleging that “Defendants, individually and in concert, directly and indirectly, engaged in and employed acts and a fraudulent scheme ... ”). Accordingly, Judge Gettleman concluded that the facts alleged
The Holdens argument as to why Judge Gettleman purportedly erred in this aspect of his order is, with all respect, not a substantial one. First, the Holdens argue that agency and coordinated misconduct principles are not applicable because De-loitte does not concede that it is a cocon-spirator or agent of other alleged malefactors. As indicated, federal precedent has looked to the allegations in the plaintiffs complaint, and has not required the defendant to concede such a substantive issue to advance its arbitration arguments. The Holdens cite no federal authority in support of their position on this point, but instead cite two intermediate appellate decisions from Illinois.
(See
Holden Mem. at 8 (citing
Peach v. CIM Ins. Corp.,
In their reply brief regarding their reconsideration motion, the Holdens for the first time suggest that the agency/concerted misconduct basis for Judge Gettleman’s ruling is infirm because it conflates the concept of an “agent” with that of a “promoter,” who bears fiduciary duties because of the promoter’s access to confidential information. (Holden Reply at 3.) This suggestion is no basis to displace Judge Gettleman’s ruling.
First, this argument appears for the first time in a reply brief — and to a reconsideration motion' — notwithstanding that Judge Gettleman clearly ruled that arbitration was warranted on the basis of the agency/concerted misconduct allegations in his opinion. Making an argument for the first time in a reply brief, as a matter of process, is insufficient to present an argument in a trial court.
See FTC v. World Media Brokers,
Accordingly, the Court finds no basis to reconsider Judge Gettleman’s decision that Deloitte can enforce the Arbitration Clause under agency and related principles.
iv. Third-Party Beneficiary Theory
Judge Gettleman also found that “the Holden contract ... contain[s] a provision whereby the sellers acknowledge for the benefit of’ Deloitte that Deloitte “was not related to EPS and that EPS and the individuals related to EPS with whom the sellers have dealt, have acted and will act on behalf of EPS and not ... [Deloitte]. These provisions were intended to confer benefit on” Deloitte, “and under
MS Dealer,
As Judge Gettleman alluded, numerous federal decisions have permitted third-party beneficiaries to enforce arbitration clauses.
See, e.g., Collins v. Int’l Dairy Queen, Inc.,
The Holdens contend that the provisions of the SPA should be interpreted pursuant to California law, rather than federal law, to determine whether Deloitte can invoke the SPA between the Holdens and EPS. Notably, although the Holdens principally cite three California decisions in support of their contention, those decisions appears to be materially distinguishable and, with all respect, less relevant than
Metalclad Corp. v. Ventana Envtl. Org. P’Ship,
In addition, the California cases the Hol-dens principally cite seem less relevant than the holding of the California Court of Appeals in
Metalclad.
The principal case the Holdens cite is
Whiteside v. Tenet Healthcare Corp.,
Bancomer, S.A. v. The Superior Court of Los Angeles County,
The Holdens also cite
Murphy v. Allstate Ins. Co.,
In sum, the Holdens have not made a serious attempt to satisfy the applicable standards for relief on a reconsideration motion or for a situation where a party seeks for one district court to upend a ruling of its predecessor district court in an inherited case. Moreover, Judge Get-tleman found that arbitration was appropriate on three independent bases, the first two of which, at least, seem clearly to be correct. The Reconsideration Motion is respectfully denied.
III. Confirmation or Vacatur of the Arbitration Award
Shortly after the Panel issued the Arbitration Award, the Holdens moved to vacate the award and to set the case for trial. The Holdens do not request that any part of the Award be sent back to the Panel for clarification or further explication. De-loitte filed a motion to confirm the award. The Court first addresses the Holdens’ motion to vacate.
A. The Holdens’ Motion to Vacate
1. Standard of Review
The Seventh Circuit has repeatedly instructed that “[jjudicial review of an arbitration panel’s award is extremely limited.”
Yasuda Fire & Marine Ins. Co. v. Cont'l Cas. Co.,
“The fact that an arbitrator makes a mistake, by erroneously rejecting a valid, or even a dispositive legal defense, does not provide grounds for vacating an award unless the arbitrator deliberately disregarded what she knew to be the law.”
Flexible Mfg. Sys.,
“ ‘Thinly veiled attempts to obtain appellate review of an arbitrator’s decision’ ... are not permitted under the FAA.’ ”
Flexible Mfg.,
Section 10(a) of the FAA sets forth the few narrow grounds on which an arbitration may be vacated: (1) the award was procured by fraud, corruption or undue means, (2) there was evident partiality or corruption on the part of the arbitrators, (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing for sufficient cause shown, or in refusing to hear pertinent and material evidence or any other misbehavior which prejudices the rights of any party to the arbitration, or (4) the arbitrators exceeded their powers or executed these powers so imperfectly, that a mutual, final and definite award was not made. 9 U.S.C. §§ 10(a)(1)-10(a)(4). The Holdens principally contend that the Arbitration Award should be vacated because the Arbitrators “manifestly disregarded the law”' — a judicial gloss that courts often have superimposed on the statute.
(See
Holden Mem. at 13);
see also Baravati v. Josephthal, Lyon & Ross, Inc.,
At least one panel of the Seventh Circuit has questioned whether the “manifest disregard” gloss is even legitimate.
Baravati,
This Court need not consider whether recent potential narrowing of the scope of review under the “manifest disregard” concept in Baravati and George Watts might be material in some different situations or other cases. In the case sub judice, this Court can assume arguendo that the “manifest disregard” standard allows for all of the (extraordinarily limited) review provided in the precedents discussed in the initial paragraphs of this level of review section (e.g., Flexible Mfg., Gingiss Int’l, IDS Life Ins. Co., Nat’l Wrecking, and Dean, supra). Suffice to say that, under any view of the precedent, clear and manifest legal or factual error is not enough to vacate an award. This Court is not to review for sufficiency of the evidence. And the arbitrators must, to manifestly disregard the law and their duties, have deliberately disregarded what they knew to be the law. As explained below, the Holdens’ challenge to the Award, reviewed under such standards, fails.
2. The Holdens Have Not Identified a Legitimate Basis to Find That the Arbitrators Manifestly Disregarded Their Duty and Governing Law
Even if everything the Holdens claim with respect to the Arbitration Award is accurate, the Holdens have not demonstrated that the Panel exhibited a manifest disregard for the law. Although the Court will address the Holdens’ specific objections in more detail below, the Court notes that the Holdens do not allege, nor does the record suggest, that the Arbitration Order requires any party to violate the law.
See, e.g., George Watts,
a. The Loss Causation Issue
The Holdens assert that the Panel applied the wrong burden of proof and the wrong standard of loss causation. (Holden Mem. at 12.) Absent from their motion, or for that matter, from the Arbitration Award itself, is
any
serious suggestion
Moreover, and most significantly, given that the Holdens in essence contend that the Panel erred in their application of the burden of proof on the “proximate cause” issue, that is the sort of claim of legal error (or “clear” legal error, or “gross” legal error) that the Seventh Circuit has repeatedly counseled will not justify overturning an arbitral award.
See, e.g., Flexible Mfg.,
Notwithstanding the extensive body of Seventh Circuit precedent that dooms their challenge, the Holdens repeatedly point to
Anheuser-Busch, Inc. v. Local Union No. 744,
Lastly in this regard, the Holdens err when they suggest that their legal error
b. Failure of the Arbitrators to Decide Certain Issues
The Holdens appear to allege that the Panel’s Award should be vacated because the Panel reserved certain issues in the course of reaching a clear-cut bottom-line that the Holdens had failed to prove their ease. (Holden Mem. at 17.) The Holdens do not cite a single case in support of their argument that the Award should be upended in such a circumstance.
The Court notes that the Holdens concede that they do not claim “that the arbitrators ignored everything, denied all claims, and went golfing (as in the extreme example given by the
IDS
court.)”
(Id.
at 18.) In making this concession, the Hol-dens reference
IDS Life Ins. Co. v. Royal Alliance Assocs., Inc.,
This Court can certainly assume for present purposes that
IDS Life Ins. Co.
does not require an express statement by the arbitrators that they were abandoning the arbitral process and deliberative review in favor of a recreational diversion before their award would be infirm. Nonetheless, the thrust of the teaching in
IDS Life Ins. Co.
— which emphasized that even claims of manifest and dispositive error do not justify refusal to confirm an award
(see id.
at 650 (collecting cases)) — is clear, and it does not support the Holdens.
Accord, e.g., Nat’l Wrecking,
c. Federal Rules of Evidence Challenge
The Holdens contend that the Arbitration Award must be vacated because the
The Court respectfully disagrees. First, as stated above, the Court finds that a significant basis for the Panel’s decision was the credibility of the expert testimony offered by the Holdens regarding De-loitte’s responsibility for EPS’s collapse; the Panel’s decision did not rely solely on the testimony offered by Deloitte.
Second, and more fundamentally, even if the Holdens’ evidentiary objection were well-taken, it would not justify vacating the arbitral award. The Court notes that the Holdens have not cited any case where an evidentiary error in an arbitration was seen as a basis to upend an award. In fact, the Holdens did not cite any case in which the Seventh Circuit even entertained such a claim. Given that even clear and material legal error is not a basis for vacating the result of the
arbitration
— e.g.,
Flexible Mfg.,
This Court need not resolve this ques
tion
— ie., whether an evidentiary error might be a cognizable basis for a court to refuse to enforce an arbitral award. The apparent approach in the few district court decisions cited which entertain such evi-dentiary claims is that the objector must show not only that the evidentiary ruling was incorrect, but also “that the error deprived the claimant of a fundamentally fair hearing.”
In re A.H, Robins Co.,
Deloitte contends, and the Holdens do not dispute, that the Panel presided over a fifteen day evidentiary hearing, at which it heard from dozens of witnesses and received hundreds of exhibits. (D.E. 97 at 1.) During the course of these proceedings — again, according to Deloitte and unchallenged by the Holdens (id. at 18 n. 18) — the Panel ruled on numerous motions in limine and evidentiary objections. Under such circumstances, the single evidentiary error suggested (assuming it is even error, as the issue is presented in rather abbreviated fashion) cannot fairly be seen as depriving the Holdens of a fundamentally fair hearing process.
Moreover, to the extent that the Hol-dens are claiming that the allegedly inadmissible and/or irrelevant evidence was a substantial evidentiary foundation for the Panel’s ruling, that claim is also one that does not warrant a different outcome. The Seventh Circuit has repeatedly held that “insufficiency of the evidence is not a
d. Reasoned Award Challenge
The Holdens contend that the Arbitration Award should be vacated because it is not a “concise statement regarding the reasons for the disposition of any claim,” as required by the Arbitration Agreement and amendment thereto. (Holden Mem. at 20.) According to the Holdens, “[u]nder AAA rules (R42) this requires at least a ‘reasoned award,’ if not findings of fact and conclusions of law.” (Holden Mem. at 20.)
The Court again respectfully disagrees. First, the Court finds that the “Award and Statement of Reasons” section of the Arbitration Award is, in fact, a concise statement providing the reasons for the disposition of the Holdens’ claims against Deloitte.
See, e.g., ARCH Dev. Corp. v. Biomet, Inc.,
No. 02 C 9013,
In addition, as Judge Zagel noted,
Even if the [][a]ward were not a reasoned award by some unstated definition, that does not provide a basis on which it can be vacated. [The Objector] has cited no cases supporting the proposition that failure to provide a reasoned award is a basis for vacating an award. Further, failure to provide a reasoned award cannot form the basis for finding that the Arbitrator exceeded his powers. Indeed, it is very strange to assert that an arbitrator has exceeded his powers by not doing enough.
Id. at *5, n. 4. 23
For all of the reasons mentioned above, the Court denies the Holdens’ motion to vacate the Arbitration Award.
B. Deloitte’s Motion to Confirm
“[I]f the district judge is satisfied that the arbitrators resolved the entire dispute and can figure out what that resolution is, he must confirm the award.”
IDS Life Ins. Co.,
“[T]he FAA provides that, upon proper application of a petition to confirm an arbitration award, a federal court ‘must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.’ ”
ARCH Dev.,
For the reasons stated above, the Court finds no basis for it to disturb Judge Get-tleman’s prior order or to vacate the Arbitration Award. Accordingly, the Court confirms the Arbitration Award.
IV. Conclusion
The Court grants Deloitte’s motion to confirm the Arbitration Award (D.E.92), and denies the Holdens’ motion to vacate Arbitration Award, to Reconsider Arbitration Order, and to Set Case for Jury Trial (D.E.89).
So ordered.
Notes
. The Holdens implicitly suggest that the Panel was dilatory in its handling of the arbitration. (See D.E. 98 (“Holden Mem.”) at 1) ("Although the goal of arbitration is supposedly swift and inexpensive justice, this case took over three years to complete.”).) Given that the Holdens expressly agreed to expand the scope of discovery and to extend various deadlines via the Arbitration Agreement that otherwise would have applied, this suggestion is made with some meaningful degree of ill-grace. Moreover, the Court notes that the Panel stated that the parties filed 65 briefs regarding some 20 discovery disputes, with "many [of the briefs] running 15 pages or more.” (Award at 2.) Although the Award does not specify which party filed which briefs, there is no suggestion that the Holdens refrained from this process, nor any reasonable basis to think they did. Resolving such contentious disputes in a responsible manner takes time.
. Deloitte contends that, because the Holdens enlisted the assistance of the arbitration Panel in effectuating the settlement with Jefferies & Company, Inc. (which Judge Gettleman also ordered to arbitration in the same opinion and on the same bases as he ordered Deloitte and the Holdens to arbitration), the Holdens should be judicially estopped from challenging the authority of the Panel to arbitrate their claims pursuant to the Arbitration Order. More specifically, according to Deloitte, after the Holdens settled their claims against Jefferies, they represented to the Panel that “a condition precedent to the effectiveness of that agreement is this Panel's issuance and the District Court’s confirmation of a Bar Order under the Private Securities Litigation Reform Act ('PSLRA').” (D.E. 97 at 5.) According to Deloitte, the Panel in response issued an award containing the requested bar order, and the Holdens and Jefferies then jointly moved this district court for confirmation of that award, which motion was granted.
(See id.)
Deloitte contends that because the Holdens "previously represented in this Court that the Panel had authority to enter binding awards and sought and obtained confirmation of such an award, the Holdens are judicially estopped from denying that the very same Panel lacked jurisdiction to hear their claims against Deloitte.”
(Id.
(citing
New Hampshire v. Maine,
. It appears the Plaintiffs filed an amended complaint after the completion of the briefing on the arbitration motions. (D.E.56.) Judge Gettleman's opinion does not make anything of the amendment, and it does not appear that the parties did either. Accordingly, the Court will take references from the operative complaint at the time that the issues were briefed to Judge Gettleman.
See generally Weinstein v. Schwartz,
. See also, e.g., id. ¶ 53 (alleging that misrepresentations of, inter alia, Deloitte, induced the Holdens to enter into letter of intent culminating in the SPA); id. ¶ 56 (discussing Deloitte's endorsing of alleged misrepresentations made by CEO of EPS at January 1999 meeting); id. ¶ 59 (alleging that the misrepresentations at the January 1999 meeting "were instrumental in convincing the Holdens that selling their companies to the roll-up was a good idea”); id. ¶ 61 (alleging that "[o]n numerous other occasions, commencing in mid-December of 1998 through March of 1999,” Deloitte, Massey (the CEO of EPS) and others made fraudulent misrepresentations to the Holdens); id. (discussing allegedly false "written representation, originally composed by [Deloitte] accountants and then maintained and refined by the CEO of EPS [Massey] and his staff”); id. ¶ 62 (alleging that "[substantially the same data was also in the documentation for the Holdens' March 19, 1999 closing of their sale of all their shares in Holden Corp” to EPS as effected by the SPA).
. See also id. ¶ 73 (alleging that "in March of 1999, Massey [the CEO of EPS], with the cooperation of [Deloitte], continued to conceal from the Holdens relevant and key facts”); id. ¶ 76 (alleging that Deloitte, Jeffer-ies, Massey, and others "induced EPS to falsely represent” certain financial information about EPS); id. ¶ 77 (alleging that De-loitte, Jefferies, Massey and others fraudulently induced the Holdens to rely on Deloitte and Jefferies to conduct due diligence concerning, inter alia, information reflected in Schedule 3.6 of the SPA).
. See also, e.g., id. ¶ 89 ("[e]ach such fraudulent communication constituted a predicate act of racketeering as set forth in the Racketeer Influenced and Corrupt Organization Act (18 U.S.C. § 1962(c)).”); id. ¶ 108 (fraud count alleging that "[t]he statements made by or on behalf of [Deloitte], Massey [a Deloitte senior partner and/or CEO of EPS], and each of the other defendants [which included EPS], as set forth in the foregoing allegations and in the Exhibits to this complaint, were false and known to be false by those who made them”).
. See also id. ¶ 75 (alleging that from "December 1998 through March 1999, the Hol-dens were urged by or on behalf of [Deloitte], Jefferies, Massey,” and others to close their sale of their shares via the SPA on March 19, 1999); id. ¶ 79 (alleging that in March 1999, Deloitte, Jefferies, Massey, and others "failed to disclose” various negative information about EPS "and instead continued to give them a rosy picture of the future and urged them to close the transaction [via the SPA] on March 19, 1999”); id. ¶ 80 (alleging that, because of their fraudulent activities, Deloitte, Jefferies, Massey, EPS, and others induced the Holdens to sell their interests in Holden Corp. via the SPA); id. ¶ 102 (alleging that "Defendants, individually and in concert, directly and indirectly, engaged in and employed acts and a fraudulent scheme ... ”).
.See, e.g., id. ¶ 103 (alleging that "[n]o later than in the summer of 1998, beginning and continuing through March 19, 1999 and thereafter, the defendants named herein ... made a series of false and misleading statements and omissions, all of which caused the Holdens to pay for EPS stock [at] an artificially inflated price” via the SPA); id. ¶ 105 (alleging that "[t]he Holdens have suffered substantial damages in that, in reliance on false and fraudulent statements, they sold their companies [via the SPA] in exchange for shares of EPS stock.... The Holdens would not have purchased EPS stock at the effective prices he [sic] paid by exchanging it for their shares and interests in their companies, or at all, if they had been aware that the statements on which they were relying were false and misleading and that other relevant facts had been concealed”); see also, e.g., ¶ 88 (seeking damages in excess of $100,000,000); ¶¶ 106, 113, 116, 121 (all same).
. Other federal courts have observed the different outcomes in cases where the non-signatory, rather than the signatory, seeks to compel arbitration. For example, the Fifth Circuit distinguished the cases compelling signatories such as the Holdens to arbitrate where those parties had agreed to arbitrate claims of the type that they assert against the non-signatory.
Bridas S.A.P.I.C. v. Government of Turkmenistan,
. In a sense, the Holdens at times appear to concede as much, for they state that "[i]n certain limited circumstances, courts have permitted nonsignatories to a contract to compel arbitration absent an agreement permitting them to do so.” (Holden Mem. at 7.) The Holdens also concede that "[t]he FAA would apply, of course, to the question of whether the [SPA] agreement, once construed under state law, could be extended to compel a non-signatory (like Deloitte) to arbitrate.”)
{Id.
at 4 n. 2.) The Holdens then proceed to argue, unpersuasively, why Judge Gettleman clearly erred in concluding that arbitration was warranted.
See Hoffman,
. Although the Court has not attempted to carefully review the Holdens’ amended complaint, which was filed after the arbitration motions were fully briefed, the Court notes that the amended complaint does not appear, for example, to contain a RICO count. (D.E.56.) The Court does not view that issue as material for multiple reasons. First, one cannot fairly second-guess Judge Gettleman for ruling on the basis of the complaint that was on file at the time the arbitration motions were filed and fully briefed, and on which they are predicted — particularly where none of the parties appears to have suggested that the amended complaint materially changed anything. In addition, and independently, the Court notes that the amended complaint still contained a conspiracy count, which alleged the complicated fraud scheme, and it identi
. In fact, the Holdens sought to treble that number through the RICO count. {See id. ¶ 97(a).)
. See also id. (“In this case, the Holdens bargained to exchange their company for a value in excess of its so-called fair market value. [....] That was what was bargained for and that is what the Holdens are entitled to on the benefit of the bargain theory.”).
.
The Holdens repeatedly point to the fact that the SPA contains a provision limiting the creation of third-party rights under it. The Holdens argue that because of this provision, equitable estoppel and agency principles cannot be used to require the Holdens to arbitrate their claims. The Holdens cite no authority adopting such an argument or even commenting on it favorably, and this Court does not find it persuasive. First, the absence of supportive authority is notable. These sorts of provisions are
de rigeur,
and one can reasonably assume that similar provisions existed in the series of cases establishing the equitable estoppel and agency bases for compelling arbitration. Second, and independently, agency concepts and coconspirator concepts teach that the alleged coconspirator (or coschemer, or agent) is effectively in the shoes of the signatory defendant and that the two parties are responsible for each other’s misconduct. As a result, the idea that other third-parties might not otherwise acquire rights under contractual liability principles is, with all respect, beside the point. The non-signatory, by virtue of the plaintiffs’ allegations, is standing in the shoes of the signatory. Third, and again independently, to the extent that application of equitable estoppel has to do with concepts of equity and fairness — and precedent would suggest that it has much to do with them,
see, e.g., Grigson v. Creative Artists Agency, L.L.C., 210
F.3d 524, 528 (5th Cir.2000) ("The linchpin for equitable estop-pel is equity — fairness");
Hughes Masonry Co., Inc., v. Greater Clark County Sch. Bldg. Corp.,
. The idea of assessing arbitrability based on the allegations in the complaint also makes substantial practical sense. Arbitrability issues must be sorted out sooner rather than later in a case, lest the party seeking to compel arbitration be seen to have waived the issue. As a result, the question of arbitrability would seem to be fairly addressed, at least typically (perhaps absent some claim of coercion or the like) on the basis of the plaintiff’s allegations and the language of the operative arbitration clause, and not on the basis of issues that might not be resolved until after extensive discovery was completed.
. In addition, absent extraordinary circumstances, presenting an argument for the first time in a reconsideration motion is an insufficient basis to present an argument to a trial court.
See, e.g., Caisse Nationale De Credit Agricole v. CBI Indus., Inc.,
. In addition, although the Court need not pass definitively on this issue, the Holdens' proffered authority in support of their "promoter” argument does not bear the weight they would place on it, at least as they (belatedly) present the argument. The word "promoter” appears nowhere in
Gratz v. Claughton,
. Moreover, it bears mention that the Ninth Circuit has observed that California’s law of loss causation is far from clear or settled.
Shawmut Bank, N.A., et al. v. Kress Assoc., et al.,
. Likewise, and with all respect, the Holdens seriously err when they suggest that
Baravati v. Josephthal, Lyon & Ross, Inc.,
. The Award states that the parties filed "about 20 motions regarding discovery in which over 65 briefs were filed, many running 15 pages or more. Approximately 68 subpoena requests were submitted ... for review and approval and a number were contested.” (Award at 2.)
. At the end of this extended proceeding, counsel for the Holdens thanked the Panel for their attention. (See D.E. 97, Ex. B, Tr. at 3102-03 ("[W]e appreciate the time that the arbitrators have put in and really how officially you’ve run the proceedings.”).)
. Moreover, to the extent it even matters under the applicable level of review, the Hol-dens overstate the degree to which the Panel reserved its views about the subjects of which the Holdens complain. For example, the Panel noted that the Holdens and their sophisticated advisers "knew they didn’t have current financial and operational information on EPS, yet nevertheless opted to close the transaction.” (Award at 7.) This is not language that one seeking to prove fraud would likely find
encouraging
— see
generally, e.g., Am. Nat’l Bank & Trust v. AXA Client Solutions,
L.L.C., No. 00 C 6786,
. To the extent the Holdens believed that the Award was somehow incomplete, they could have — but did not — filed a motion requesting that the Court send the Award back to the Panel for further elaboration. The Holdens (likely strategic) decision to seek only a jury trial in district court is not a basis for ignoring precedent concerning applicable standards of review or for vacating the Award.