WACHOVIA SECURITIES, LLC, a Delaware Corporation and successor in interest to AG Edwards & Sons, Inc. v. Frank J. BRAND, II, individual; Marvin Slaughter, individual; Stephen N. Jones, individual; George W. Stukes, individual
No. 10-2111
United States Court of Appeals, Fourth Circuit
February 16, 2012
Argued: Dec. 8, 2011.
IV.
We cannot hold, as Kunda advocates, that her unvested Premium Units are converted into wages in the limited situation where an employee is terminated without cause. Thus, we affirm the district court‘s grant of Bard‘s motion to dismiss.
AFFIRMED
Before DUNCAN, DAVIS, and WYNN, Circuit Judges.
Affirmed by published opinion. Judge DUNCAN wrote the opinion, in which Judge DAVIS and Judge WYNN joined.
OPINION
DUNCAN, Circuit Judge:
Wachovia Securities, LLC (“Wachovia“)1 appeals from the district court‘s refusal to vacate an arbitration award entered against it after it sued several former employees on what the arbitrators determined were frivolous claims. Wachovia argues that the arbitrators (the “Panel“) violated
ARGUED: Stephen Montgomery Cox, Robinson, Brad-Shaw & Hinson P.A., Rock Hill, South Carolina, for Appellant. Joseph A. Dougherty, Buchanan, Ingersoll & Rooney, PC, Philadelphia, Pennsylvania, for Appellees. ON BRIEF: J. Rene Jo-
I.
A.
Wachovia initiated an arbitration proceeding by filing a Statement of Claim with the Financial Industry Regulatory Authority (“FINRA“)2 against four former
In the arbitration proceeding, Wachovia alleged that the Former Employees had violated their contractual and common law obligations when they joined Stifel.3 Specifically, Wachovia claimed that the Former Employees conspired with Stifel to open a competitor office in Florence, South Carolina, and that they had misappropriated confidential and proprietary information in the process. Wachovia further complained that the Former Employees were soliciting current Wachovia clients and employees to join their new firm. In addition, Wachovia sought a permanent injunction, the return of records, and an award of costs and attorneys’ fees associated with the arbitration. It repeated these requests in its amended Statement of Claim filed on July 23, 2008.
The Former Employees’ Answer described this dispute as “meritless” and an effort “to punish former [A.G. Edwards] employees for leaving in the wake of Wachovia‘s acquisition of A.G. Edwards, to intimidate and deter its current employees from making similar decisions, to prevent customers from obtaining information necessary to make an informed decision as to whether the customer wishes to do business, and to otherwise stifle legitimate competition.” J.A. 460. The Former Employees requested that the Panel award them attorneys’ fees and costs incurred in defending themselves “from Wachovia‘s baseless and unwarranted claims.” J.A. 461. They also asserted counterclaims under the South Carolina Wage Payment Act (“Wage Act“), codified at
The arbitration proceeded before a panel of three arbitrators in accordance with FINRA‘s rules for “industry disputes.” See FINRA R. 13000. The first month of arbitration proceedings, during which both sides presented evidence, was unremarkable. Then, on October 22, 2009, the panel asked the parties to submit accountings or proposals regarding requested attorneys’ fees, forum fees, expert fees and any costs or expenses during the final two days of hearings, scheduled for November 23 and 24, 2009. Wachovia requested that the
Despite the deadline, Wachovia was unprepared to submit its brief on fees on November 23, 2009 and requested a one-day extension.4 The Panel permitted the extension, and the parties therefore submitted their briefs on November 24, 2009, the last planned day of hearings. Both parties’ briefs contained new arguments regarding attorneys’ fees. Wachovia argued, despite its own request for attorneys’ fees in its Statement of Claim, that under the South Carolina Arbitration Act, neither party was entitled to attorneys’ fees. The Former Employees argued for the first time that they were entitled to attorneys’ fees under the FCPA.
As its name suggests, the Frivolous Civil Proceeding Act provides a mechanism for litigants to seek sanctions against attorneys who file frivolous claims. It contains a number of procedural safeguards for litigants facing sanctions. Significantly for our purposes, the statute provides for a notice period affording the accused 30 days to respond to a request for sanctions and a separate hearing on sanctions after the verdict.
Upon learning that the Former Employees were seeking sanctions under the FCPA, Wachovia expressed concern that the arbitrators were not affording them 30 days’ response time or a post-verdict hearing on the issue of fees. Toward the end of the hearing on November 24, the chairman of the Panel asked Wachovia if “you have been given a fair opportunity to present your case in its entirety in these proceedings.” J.A. 201. Wachovia responded that it had not been given a fair opportunity with respect to “the issues raised and argued as to attorneys’ fees.” J.A. 201-02. The Panel then asked whether additional briefing would cure the concerns. Wachovia replied:
I don‘t know. Because the standard and the [FCPA] from what I saw, there‘s notice and opportunity to be heard. So that means in other words, we need some evidence. That‘s why I don‘t think it‘s appropriate at the end, after our record is closed, that new issues have been injected. The statute is not referred to in the pleadings. So it‘s not just the element of surprise. It‘s a complete surprise.
J.A. 202-B.
After listening to Wachovia‘s objections to the Panel reaching any decision on the
On December 18, 2009, the Panel issued an award in which it denied all of Wachovia‘s claims. It awarded the Former Employees $15,080.67 in treble damages on their Wage Act claims, as well as $1,111,553.85 for attorneys’ fees under the FCPA. Although the Former Employees had also sought attorneys’ fees under several South Carolina statutes, the Panel awarded them fees only under the FCPA and indicated that “any and all claims not specifically addressed herein” were denied. J.A. 86.
B.
Following arbitration, the Former Employees filed a motion to confirm the Panel‘s award in the District of South Carolina. Wachovia filed its own motion to vacate that portion of the Panel‘s award granting relief to the Former Employees on January 19, 2010. It argued for vacatur on two grounds. First, it contended that the Panel exceeded its authority and manifestly disregarded the law under
The district court began by rejecting Wachovia‘s argument that the arbitrators violated
The district court also disagreed with Wachovia‘s argument that a statute must mention arbitration in order to be applicable in arbitration. It further rejected Wachovia‘s claim that the language of the FCPA supported vacatur under a manifest disregard standard because the statute only applied to “courts” following a “verdict.” It reasoned that Wachovia had not shown that the arbitrators understood the law as having a meaning that they chose to ignore.
Turning to Wachovia‘s claim that the Panel was “guilty of misconduct in refusing to postpone the hearing ... or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party [had] been prejudiced” in viola-
II.
Wachovia appeals the district court‘s holding that the arbitrators neither violated
We begin our examination of Wachovia‘s claims by first looking at the narrow standard of review that guides our analysis. Next, we consider Wachovia‘s contention that
A.
On appeal from a district court‘s denial of vacatur, “we review de novo the court‘s legal rulings.” Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir.2007) (citing Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir.2006)). “Any factual findings made by the district court in affirming such an award are reviewed for clear error.” Id. (citing Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 145 (4th Cir.1993)). We note that judicial review of an arbitration award in federal court “is severely circumscribed.” Apex Plumbing Supply, Inc. v. U.S. Supply Co., 142 F.3d 188, 193 (4th Cir.1998). “A court sits to ‘determine only whether the arbitrator did his job—not whether he did it well, correctly, or reasonably, but simply whether he did it.‘” U.S. Postal Serv. v. Am. Postal Workers Union, 204 F.3d 523, 527 (4th Cir.2000) (quoting Mountaineer Gas Co. v. Oil, Chem. & Atomic Workers Int‘l Union, 76 F.3d 606, 608 (4th Cir.1996)).
B.
Turning now to Wachovia‘s argument that
In this appeal, Wachovia argues that the Panel was “guilty of misconduct in refusing to postpone the hearing ... or in refusing to hear evidence” in violation of
First, Wachovia has cited no authority for the proposition that state procedural requirements must be imported into arbitration. In International Union, United Mine Workers v. Marrowbone Development Co., 232 F.3d 383, 389 (4th Cir. 2000), we said that “[a]n arbitrator typically retains broad discretion over procedural matters and does not have to hear every piece of evidence that the parties wish to present.” Wachovia argues that it was entitled to 30 days to respond after the Former Employees requested FCPA sanctions on November 24, 2009, and that the Panel should have scheduled a hearing at which it could present evidence about attorneys’ fees. In short, Wachovia argues that the Panel must comply with the FCPA‘s procedural provisions if it relies on the FCPA‘s substantive provisions when awarding attorneys’ fees. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), which held that the FAA preempted a California rule holding that any contract that disallowed class proceedings was unconscionable, the Supreme Court explained that “the informality of arbitral proceedings is itself desirable, reducing the cost and increasing the speed of dispute resolution.” Id. at 1749. Parties may, of course, consent to particular procedures in arbitration, but it is inconsistent with the FAA for one party to demand ex post particular procedural requirements from state law. Id. at 1750. We similarly conclude that the Panel was not compelled to follow the FCPA‘s procedural mandates insofar as Wachovia attempts to import them into this arbitration.
Second, even if we were to hold that FCPA procedures do apply in arbitration, Wachovia‘s challenge to the Panel‘s procedure would nevertheless fail because it does not allege misconduct. In Marrowbone, 232 F.3d at 390, this court held that “an arbitrator‘s procedural ruling may not be overturned unless it was in bad faith or so gross as to amount to affirmative misconduct.” (quotation marks omitted). This ruling closely tracks the plain language of
Wachovia attempts to get around this deficiency in its reliance on
To the contrary, we find that Wachovia is the architect of its own misfortune. Wachovia, not the arbitrators, cut short the hearing on the issue of attorneys’ fees. The arbitrators set the deadline for submitting briefs on the issue of attorneys’ fees for the penultimate day of hearings. Wachovia inexplicably missed this deadline and submitted its brief on the final day of arbitration, thereby leaving no time for the parties to debate the issue. Moreover, after Wachovia complained that it had not received a fair hearing on the issue of fees, the arbitrators asked Wachovia if it wanted to submit additional briefs. Wachovia turned down this opportunity. Even if Wachovia is correct in its contention that the FCPA requires a hearing in the context of arbitration, it could have used the additional briefing to explain why a hearing was necessary.
As noted above, arbitrators have broad discretion to set applicable procedure. See Marrowbone, 232 F.3d at 388. Accordingly, we will not overturn an award for violating
C.
We turn now to Wachovia‘s argument that it is entitled to vacatur under a “manifest disregard” standard. Specifically, Wachovia argues that the Panel “manifestly disregarded” the law when it refused to import the FCPA‘s procedural requirements into the arbitration. “Manifest disregard” is, as we will explain, an old yet enigmatic ground for overturning arbitral awards. Wachovia contends the Supreme Court‘s 2008 decision in Hall Street rendered “manifest disregard” a judicial gloss on
To lay a foundation for our analysis, we look first at “manifest disregard” as a basis for vacatur and our interpretation of the doctrine pre-Hall Street. We then consider how the Supreme Court‘s decisions in Hall Street and, more recently, Stolt-Nielsen v. AnimalFeeds, 559 U.S. 662, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010), have affected this analysis. Although we find that manifest disregard did survive Hall Street as an independent ground for vacatur, we conclude that Wachovia has not demonstrated that the arbitrators manifestly disregarded the law here.
1.
The origins of modern manifest disregard as an independent basis for reviewing American arbitration decisions likely lie in dicta from the Supreme Court‘s decision in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953). In Wilko, the Court explained that when interpreting the agreements at issue, “the interpretations of the law by the arbitrators in contrast to manifest disregard are not subject, in the
2.
The Supreme Court‘s decision in Hall Street has been widely viewed as injecting uncertainty into the status of manifest disregard as a basis for vacatur. There, a commercial landlord and tenant had contracted for greater judicial review of any arbitral award during a dispute about the tenant‘s alleged failure to comply with applicable environmental laws. The Supreme Court concluded that, by permitting review for legal errors, this contract impermissibly circumvented the FAA‘s limited review for procedural errors. Hall Street, 552 U.S. at 586-87. The Court rejected this approach and held that the FAA prohibited parties from contractually expanding judicial review on the theory that the grounds for vacatur in the FAA are “exclusive.” Id. This circuit has not yet interpreted manifest disregard in light of Hall Street, although it has acknowledged the uncertainty surrounding the “continuing viability of extra-statutory grounds for vacating arbitration awards.” Raymond James Fin. Servs. v. Bishop, 596 F.3d 183, 193 n. 13 (4th Cir.2010); see also MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 857 (4th Cir.2010).7
We find that the Supreme Court‘s more recent decision in Stolt-Nielsen sheds further light on the operation of “manifest disregard” post-Hall Street. In Stolt-Nielsen, a raw-ingredient supplier began arbitration proceedings against a parcel tanker company when it learned that the Department of Justice was investigating the company for illegal price-fixing. 130 S.Ct. at 1765. The arbitration clause in the parties’ agreement was silent as to whether class arbitration was allowed, so the arbitrators heard evidence, “including testimony from petitioners’ experts regarding arbitration customs and usage in the maritime trade,” and looked to the Supreme Court‘s previous decision in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S.Ct. 2402, 156 L.Ed.2d 414 (2003), to determine whether the arbitration agreement permitted class arbitration. Id. at 1766. The arbitrators eventually permitted class arbitration based on Bazzle and without making a determination regarding which of the potentially applicable bodies of law—the FAA, federal maritime law, or New York law—applied. Id. The district court vacated the award for manifest disregard, reasoning that the arbitrators “failed to make any meaningful choice-of-law analysis.” Stolt-Nielsen SA v. Animalfeeds Int‘l Corp., 435 F.Supp.2d 382, 385 (S.D.N.Y.2006). The Second Circuit reversed, finding that although manifest disregard survived as a “judicial gloss” of the FAA after Hall Street, it was inapplicable because the arbitrators had not cited authority contrary to the position that they adopted. Stolt-Nielsen SA v. AnimalFeeds Int‘l Corp., 548 F.3d 85, 97-98 (2d Cir.2008).
The Supreme Court reversed the Second Circuit, finding that the arbitrators had improperly rested their decision on AnimalFeeds’ public policy arguments. 130 S.Ct. at 1768. It reasoned that “because the parties agreed their agreement was ‘silent’ in the sense that they had not reached any agreement on the issue of class arbitration, the arbitrator‘s proper task was to identify the rule of law that govern[ed].” Id. It then criticized the panel for “proceed[ing] as if it had the authority of a common-law court to develop what it viewed as the best rule to be applied in such a situation.” Id. at 1769. The Court explained that the panel “exceeded its powers” when it failed to apply “a rule of decision derived from the FAA or either maritime or New York law” and instead “imposed its own policy choice.” Id. at 1770.
The Supreme Court‘s reasoning in Stolt-Nielsen closely tracked the majority of circuits’ approach to manifest disregard before Hall Street: it noted that there was law clearly on point, that the panel did not apply the applicable law, and that the pan-
We do not decide whether “manifest disregard” survives our decision in Hall Street Associates, as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at
9 U.S.C. § 10 . AnimalFeeds characterizes that standard as requiring a showing that the arbitrators knew of the relevant [legal] principle, appreciated that this principle controlled the outcome of the disputed issue, and nonetheless willfully flouted the governing law by refusing to apply it. Assuming, arguendo, that such a standard applies, we find it satisfied.
Id. at 1768 n. 3 (citations and quotation marks omitted). We read this footnote to mean that manifest disregard continues to exist either “as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at
3.
Although we find that manifest disregard continues to exist as either an independent ground for review or as a judicial gloss, we need not decide which of the two it is because Wachovia‘s claim fails under both. Wachovia argues that the Panel acknowledged that it was applying the substantive provisions of the FCPA but did not follow the statute‘s procedural provisions when it declined to give Wachovia 30 days to respond to the request for fees or hold a separate hearing on the issue of fees. However, as discussed above, we find that the Panel was not compelled to import these procedural requirements if it found a different procedure to be better suited to the needs of the arbitration. In Long John Silver‘s, we adopted a two-part test that a party must meet in order for a reviewing court to vacate for manifest disregard: “(1) the applicable legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrator[] refused to heed that legal principle.” 514 F.3d at 349 (quotation marks omitted). We do not read Hall Street or Stolt-Nielsen as loosening the carefully circumscribed standard that we had previously articulated for manifest disregard. Whether manifest disregard is a “judicial gloss” or an independent ground for vacatur, it is not an invitation to review the merits of the underlying arbitration. See United Paperworkers Int‘l Union v. Misco, Inc., 484 U.S. 29, 38 (1987). Therefore, we see no reason to depart from our two-part test which has for decades guaranteed that review for manifest disregard not grow into the kind of probing merits review that would undermine the efficiency of arbitration. In this case, we find that whether the Panel erred by not applying the FCPA‘s procedural requirements is a question that was itself not clearly defined and was certainly subject to debate. Accordingly, we cannot hold that the arbitrators manifestly disregarded the law when they awarded Appellees $1.1 million in attorneys’ fees and costs under the FCPA.
III.
For the foregoing reasons, the decision of the district court is
AFFIRMED.