Wholesalecars.com v. Hutcherson
MEMORANDUM OPINION AND ORDER re 11 Motion to Substitute Party and 16 Response to Order to Show Cause- For the reasons discussed within, the court CONSTRUES Mr. Leo's motion as a motion to intervene and GRANTS the motion. After reviewing Who lesalecars.com's response to the order to show cause, the court FINDS that the arbitral award was final and that this case should not be stayed or compelled to arbitration at this point. The court ORDERS Ms. Hutcherson and Mr. Leo to file a response to Wholesalecars.com's petition addressing the issues as outlined within. The responses are due March 24, 2017. Wholesalecars.com's replies will be due April 7, 2017. Signed by Chief Judge Karon O Bowdre on 3/3/17. (SAC )
2017 Mar-03 PM 01:20
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
CASE NO.: 2:16-cv-00155-KOB
MEMORANDUM OPINION AND ORDER
Before the court is Bankruptcy Trustee Rocco J. Leo's “Motion to Substitute Party,” (doc.
11), and Wholesalecars.com’s “Response to Order to Show Cause,” (doc. 16). For the reasons
discussed below, the court CONSTRUES Mr. Leo’s motion as a motion to intervene and
GRANTS the motion. After reviewing Wholesalecars.com’s response to the order to show cause,
the court FINDS that the arbitral award was final and that this case should not be stayed or
compelled to arbitration at this point.
Wholesalecars.com terminated Cory Hutcherson’s employment, and Ms. Hutcherson filed
suit in the Northern District of Alabama on September 11, 2013, alleging that the company had
illegally discriminated against her by firing her because she was pregnant.1 The court compelled
the case to arbitration, and Ms. Hutcherson initiated an arbitration of her claim with the
American Arbitration Association.
Case No. 14-1382.
After an arbitration hearing, Ms. Hutcherson filed for Chapter 7 bankruptcy. Ms.
Hutcherson allegedly did not disclose the existence of her cause of action against
Wholesalecars.com in her bankruptcy proceeding despite having several opportunities to do so.
Ms. Hutcherson also allegedly did not disclose the existence of the bankruptcy proceeding to the
arbitrator. The bankruptcy court discharged approximately $150,000 of Ms. Hutcherson’s debts,
and the arbiter found in favor of her on her discrimination claim, awarding her $116,677.22, plus
attorney fees and costs.
Wholesalecars.com then commenced this action to vacate the arbitration award. Rocoo
Leo, as trustee of Ms. Hutcherson’s bankruptcy estate, filed a motion to substitute himself for
Ms. Hutcherson as the real party in interest. Mr. Leo also filed a response to
Wholesalecars.com’s petition. After reviewing Mr. Leo’s answer, the court ordered
Wholesalecars.com to show cause why: 1) the court should not grant Mr. Leo's motion to
substitute parties; 2) the court should not dismiss this case for lack of jurisdiction because the
interim arbitration award in this case is not a final arbitral award and thus not proper for review
by this court at this time; 3) the court should not grant Mr. Leo's motion to compel arbitration;
and/or 4) stay this case until the Eleventh Circuit denies the petition for rehearing or issues a
decision upon rehearing in Slater v. U.S. Steel Corp. The court will now consider these issues, as
well as Mr. Leo’s motion to substitute parties.
Motion to Substitute Parties
Mr. Leo argues that as the trustee of Ms. Hutcherson's bankruptcy estate, he is the real
party in interest to Ms. Hutcherson's claim against Wholesalecars.com. Accordingly, Mr. Leo has
moved to be substituted for Ms. Hutcherson under Fed. R. Civ. P. 17(a) in this action by
Wholesalecars.com to vacate the arbitration award issued in favor of Mr. Hutcherson.
Mr. Leo's motion is procedurally improper. Fed. R. Civ. P. 17(a) provides that “[e]very
action shall be prosecuted in the name of the real party in interest.” The determination of whether
a party is a “real party in interest” is limited to consideration of whether a plaintiff has an
enforceable right upon which to claim relief. See Gardetto v. Mason, 854 F. Supp. 1520, 1544
(D. Wyo. 1994) (“[I]t is improper for a defendant to complain that it is not the real party in
interest.”); 6A Charles A. Wright et al., Federal Practice and Procedure § 1542 (3d ed.) (“Rule
17(a) is limited to plaintiffs.”). Because Ms. Hutcherson is not the plaintiff in this action, she
cannot be the real party in interest.
However, Fed. R. Civ. P. 24(a) permits a party, upon timely motion, to intervene in an
action if the party “claims an interest relating to the property or transaction that is the subject of
the action, and is so situated that disposing of the action may as a practical matter impair or
impede the movant's ability to protect its interest, unless existing parties adequately represent that
interest.” Here, Mr. Leo, as trustee of the bankruptcy estate, has an interest in whether the
arbitration award in favor of Ms. Hutcherson is vacated, as that award should be an asset of the
estate. Adjudicating this dispute without the presence of the trustee would impair Mr. Leo's
ability to protect the estate's interest. Further, Ms. Hutcherson does not adequately represent the
estate's interest, as her incentive to recover for herself diverges from the trustee's obligation to
ensure that her creditors are repaid. The court also notes that Wholesalecars.com has no objection
to the trustee joining the case. (Doc. 16 at 5). Therefore, the court CONSTRUES Mr. Leo's
motion as a motion to intervene and GRANTS the motion.
Finality of the Arbitration Award
Having determined that Mr. Leo is a proper party, the court now considers the arguments
raised by Mr. Leo and Wholesalecars.com’s response.
Mr. Leo argues that “the Arbitrator's 'interim decision' was not a final order” because the
award provided it would only become final if Ms. Hutcherson did not make a request for
attorney's fees. (Doc. 12 at 6). However, Mr. Leo misreads the arbitration award. The entire
award's finality is not conditioned upon whether a request for fees is made. Rather, the award
makes a final judgment as to Wholesalecars.com’s liability to Ms. Hutcherson, the actual
damages owed her, and her entitlement to attorney's fees, and reserves ruling on the question of
the amount of those fees. For that limited purpose, the arbitrator retained jurisdiction. (Doc. 1-7)
(“[T]he arbitrator's jurisdiction over the issue of attorney's fees and expenses shall be extended
for so long as necessary to resolve it.”). The award explicitly stated that it was made “in full
settlement of all claims and counterclaims submitted to this Arbitration, except the claims for
attorney's fees and costs.” (Doc. 1-7 at 24).
An arbiter's “award cannot be final if significant issues still need to be determined.”
Legion Ins. Co. v. VCW, Inc., 198 F.3d 718, 720 (8th Cir. 1999). Therefore, the question is
whether calculation of attorney's fees is a “significant issue” that should prevent an award from
being considered final.
The Eleventh Circuit has strongly implied that such an award is final. See Schatt v.
Aventura Limoousine & Transp. Serv., Inc., 603 Fed. Appx. 881, 888 (11th Cir. 2015). In Schatt,
the Eleventh Circuit reversed a district court's judgment that an arbitration award was final. The
award decided liability but reserved calculation of actual damages. The Eleventh Circuit
distinguished the cases relied upon by the district court where the only remaining question was
the calculation of attorney's fees in determining that the award was not final. Id. (“Unlike these
cases, Schatt's ongoing arbitration involved far more remaining work than merely the calculation
of attorney's fees.”). The Court's reasoning suggests that an award is not final if it does not
include a calculation of actual damages, but is final if to resolves liability and damages, despite
not containing a calculation of attorney's fees.
A helpful analogy can be drawn with the final judgment rule. In determining whether a
court's order is final or interlocutory, the Supreme Court has said the “unresolved issue of
attorney’s fees for the litigation in question does not prevent judgment on the merits from being
final.” Budinich v. Becton Dickinson & Co., 486 U.S. 196, 202 (1988). The court sees no reason
that principle should not apply to arbitration awards. In arbitration as well as litigation, the
question of attorney's fees is an issue “collateral to and separate from the decision on the merits.”
Id. at 200. The different forum does not alter that fact. Therefore, the court finds that the
arbitration award was final and subject to review.
Compelling Judicial Estoppel Claims to Arbitration
Mr. Leo argues that “this action should be dismissed and Wholesalecars.com should be
compelled to raise its judicial estoppel argument in the arbitral forum as the parties agreed.” (Doc
12 at 11). In support of his argument, Mr. Leo cites an opinion of Judge Acker admonishing a
party for “travel[ing] two tracks simultaneously towards the same goal” by seeking interim
equitable relief from both the court and an arbitrator. Prudential Sec., Inc. v. Schrimsher, 179 F
Supp. 2d 1306, 1309 (N.D. Ala 2001).
Wholesalecars.com has not traveled two tracks simultaneously. Instead,
Wholesalecars.com presented its claims and defenses to an arbiter, who issued an award. Only
after the award was issued did Wholesalecars.com seek relief from this court. Wholsalecars.com
followed the proper procedure contained in 9 U.S.C. § 10 to vacate an arbitration award; it did
not simultaneously seek the same relief from different judicial bodies. Further,
Wholesalescars.com could not have presented its judicial estoppel claim during the previous
arbitration because it did not learn of the potential existence of the defense until after the hearing
The court reserves judgment on whether Wholesalecars.com's judicial estoppel claim is
ultimately arbitrable, as the parties have not truly briefed that issue. However, what is clear is
that this action should not be dismissed at this point because Wholesalecars.com has properly
moved under 9 U.S.C. § 10 to vacate the arbitration award on the basis it was obtained through
fraud. If the court finds that the award is due to be vacated, the court would then consider
whether Ms. Hutcherson should be estopped from pursuing her claim, the case should be
remanded to the previous arbitration panel for consideration of the estoppel defense, or if a new
arbitration should be conducted.
Staying Case Pending the Eleventh Circuit's Decision in Slater
Mr. Leo argues that the court should stay, or completely dismiss, this case pending the
Eleventh Circuit Court of Appeal's rehearing in Slater v. U.S. Steel Corp., 820 F.3d 1193 (11th
Cir. 2016). The court will not stay or dismiss this case because Slater is inapposite. Judge
Tjoflat’s special concurrence in Slater called for an en banc court to reconsider judicial estoppel
because the doctrine was “a judge-made rule that punishes innocent parties in the debtor's stead.”
Id at 1249. The question under consideration by the en banc court will likely be whether the
doctrine should be applied against a blameless trustee. Here, Wholesalecars.com does not seek to
estop the trustee, only Ms. Hutcherson. See (Doc. 16 at 13) (“Wholesalcars does not contended
that judicial estoppel applies against the Trustee in this case, only against Hutcherson.”).
Accordingly, the court sees no reason it need stay or dismiss this case in anticipation of the en
banc decision in Slater.
Now that the court has addressed the threshold issues of the proper parties and the finality
of the award in question, the court can consider arguments on the merits of the petition.
Therefore, the court ORDERS Ms. Hutcherson and Mr. Leo to file a response to
Wholesalecars.com’s petition addressing two issues: (1) whether the arbitration award should be
vacated under 9 U.S.C. § 10 because it was procured by corruption, fraud, or undue means; and
(2) whether Ms. Hutcherson should be judicially estopped from enforcing the award or otherwise
pursuing her claim (including whether the judicial estoppel defense is arbitrable). The responses
are due March 24, 2017. Wholesalecars.com’s replies will be due April 7, 2017.
DONE and ORDERED this 3rd day of March, 2017.
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
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