GE Commercial Distribution Finance Corporation v. Wheat et al
Filing
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ORDER Denying 7 Motion to Vacate Arbitration Award filed by Mark Wheat Investments Inc. and Granting 1 Application to Confirm Arbitration Award filed by GE Commercial Distribution Finance Corporation. Ordered by Judge C. Ashley Royal on 11/28/2011. (lap)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
:
GE COMMERCIAL DISTRIBUTION
:
FINANCE CORPORATION,
:
:
Petitioner,
:
v.
:
:
MARK D. WHEAT, individually, and
:
MARK WHEAT INVESTMENTS, INC.
:
:
:
Respondents.
_________________________________________
CASE NO.
5:11‐CV‐250(CAR)
ORDER ON RESPONDENTS’ MOTION
TO VACATE ARBITRATION AWARD
Currently before the Court is Petitioner’s Application to Confirm Arbitration
Award [Doc. 1], Respondents’ Counterclaim/Motion to Vacate Arbitration Award [Doc.
7], and the various responses and replies thereto. Upon consideration, Petitioner’s
Application to Confirm Arbitration Award [Doc. 1] is GRANTED. Respondents’
Motion to Vacate Arbitration Award [Doc. 7] is DENIED.
Background
Petitioner GE Commercial Distribution Finance Corporation initiated this action
seeking confirmation of the arbitration award issued in American Arbitration
Association Case No. 30 148 00513 (“Award”). In their Answer, Respondents Mark D.
Wheat and Mark Wheat Investments, Inc. (collectively “Respondents”) asserted a
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Counterclaim/Motion to Vacate seeking to vacate the Award on several statutory and
common law grounds.
This case arises out of the breach of a Financing and Inventory Agreement
(“Agreement”) entered into in April 1997 by Mark Wheat Investments, Inc., and
personally guaranteed by Mark D. Wheat.1 Petitioner asserts that Respondents
breached the Agreement by failing to pay amounts owed for a deficiency after certain
inventory was repossessed. Respondents assert that they sold the business in question
in 2003, and thus do not owe the debts owed under the Agreement. Respondents
further allege that the purchaser of Respondents’ business made false representations,
presented false financial statements, forged Respondent Mark Wheat’s name on
financial documents, and that Petitioner should have been on notice of this fraud.
On July 16, 2010, Petitioner initiated the arbitration proceeding based on
Respondents’ alleged breach. After a hearing on the merits, the Arbitrator, Marjorie
Girth (“Arbitrator”), issued the Award in favor of Petitioner on April 27, 2011. The
Arbitrator found that Respondents had not effectively terminated the Agreement, that
Respondent Mark D. Wheat had not effectively revoked his personal guaranty, and that
Respondents’ counterclaims of fraud, conspiracy, and identity theft were without merit.
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Petitioner is the successor in interest to Deutsche Financial Services Corporation, who initially entered
into the Agreement with Respondents.
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The Arbitrator awarded Petitioner damages in the amount of $112,194.52, and
attorney’s fees in the amount of $74,141.72.
Petitioner now seeks to have the Award confirmed pursuant to 9 U.S.C. § 9.
Respondents assert that the arbitration award should be vacated based on upon several
statutory and common law grounds.
Standard of Review
The provisions of the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq. (“FAA”),
control this Court’s review of an arbitration award. Judicial review of arbitration
awards is “narrowly limited,” and the FAA presumes that awards will be confirmed.
See Davis v. Prudential Sec. Inc., 59 F.3d 1186, 1188 (11th Cir. 1995). The FAA “does not
allow courts to roam unbridled in their oversight of arbitration awards, but carefully
limits judicial intervention to instances where the arbitration has been tainted in specific
ways.” Robbins v. Day, 954 F.2d 679, 683 (11th Cir. 1992), overruled on other grounds,
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947‐49 (1995). Thus, “[f]ederal
courts should defer to an arbitrator’s decision whenever possible.” Frazier v.
CitiFinancial Corp., LLC, 604 F.3d 1313, 1321 (11th Cir. 2010).
There are four statutory grounds for vacating an arbitration award:
(1) where the award was procured by corruption, fraud or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or
either of them;
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(3) where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; or of any other
misbehavior by which the rights of any party have been prejudiced; or
(4) where 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.
9 U.S.C. § 10(a). Even review pursuant to these statutory grounds is limited, as
arbitrators “do not act as junior varsity trial courts where subsequent appellate review
is readily available to the losing party.” Cat Charter, LLC v. Schurtenberger, 646 F.3d
836, 843 (11th Cir. 2011) (citation omitted).
Discussion
Respondents argue that the Award should be vacated because (1) the Award was
procured by corruption, fraud, or undue means; (2) the Arbitrator was guilty of
misconduct in refusing to hear evidence pertinent and material to the controversy; (3)
the Arbitrator exceeded her powers; (4) the Arbitrator so imperfectly executed her
powers that a mutual, final, and definitive award upon the subject matter submitted
was not made; (5) the Award is contrary to public policy; (6) the Award is arbitrary and
capricious; (7) the Award fails to draw its essence from the underlying contract; and (8)
the Award displays a manifest disregard of the law.
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Respondents first argue that the Award was procured by fraud, corruption or
undue means. In making this argument, however, Respondents fail to identify how the
Award itself was procured by fraud or corruption. Instead, Respondents make factual
arguments regarding alleged fraud committed by Petitioner in the performance of the
Agreement. These arguments and facts were raised, addressed, and discussed at the
arbitration hearing. In fact, the Arbitrator noted in the Award that “[l]iability pursuant
to the Respondents’ counterclaims for fraud, conspiracy, and identity theft is hereby
DENIED.” (Award, p. 2). Petitioner correctly points out that “a court cannot vacate an
arbitration award for fraud based on information available before or during the
arbitration that the parties, through lack of diligence, failed to discover.” AIG Baker
Sterling Heights, LLC v. American Multi‐Cinema, Inc., 508 F.3d 995, 1001 (11th Cir.
2007). Respondents do not allege that they had no access to the facts regarding
Petitioner’s alleged fraudulent actions, or that Petitioner acted to prohibit them from
obtaining such information. Thus, since this information was available to Respondents
at the time of the arbitration, Respondents’ request to vacate the award based on fraud,
corruption, or undue means is denied.
Respondents also challenge the Arbitrator’s decision to exclude a letter that
would have established that Respondents sold the business and were not involved at
the time the debt was accumulated under the Agreement. When a party challenges an
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arbitrator’s evidentiary decision, “a federal court may vacate an arbitrator’s award only
if the arbitrator’s refusal to hear pertinent and material evidence prejudices the rights of
the parties to the arbitration proceedings.” Rosensweig v. Morgan Stanley & Co., Inc.,
494 F.3d 1328, 1333 (11th Cir. 2007) (citation omitted).
The Court concludes that the Arbitrator committed no misconduct in excluding
this particular piece of evidence. Respondents failed to disclose the letter prior to the
arbitration, and in fact only produced it midway through the hearing. The Arbitrator
excluded the letter based on relevancy and the fact that it had not been previously
disclosed as required by the Arbitrator’s scheduling order and the Agreement.
Respondents had notice that a comprehensive list of exhibits was required prior to the
hearing date, and their rights were not prejudiced by the Arbitrator’s adherence to that
requirement. Arbitrators have wide latitude when conducting hearings, and the Court
will not allow Respondents a “second bite at the apple” based on their failure to abide
by the Arbitrator’s procedural requirements. Cat Charter, LLC, 646 F.3d at 842.
Respondents’ challenge to the Arbitrator’s evidentiary decision is denied.
Respondents also allege that the Arbitrator exceeded her powers and that she
failed to provide a mutual, final, and definite Award, but Respondents do not make any
substantive allegations regarding these statutory grounds. Respondents argue that the
monetary amount of the Award was excessive; presumably this is how they contend the
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Arbitrator exceeded her powers. Arbitrators derive their power from the agreement
itself, so courts must look to the agreement to determine an arbitrator’s scope of power.
White Springs Agric. Chem., Inc. v. Glawson Inv. Corp., ‐‐‐ F.3d ‐‐‐‐, 2011 WL 4907386,
at *3 (11th Cir. 2011). When determining whether vacatur is proper pursuant to 9 U.S.C.
§ 10(a)(4), the award should only be vacated where the arbitrator “strays from
interpretation and application of the agreement and effectively dispenses his own brand
of industrial justice.” White Springs, 2011 WL 4907386, at *3. Here, the Agreement
between the parties clearly gives the Arbitrator power to award attorney’s fees. In fact,
the only limit on the Arbitrator’s power is that she may not award punitive damages.
(Agreement, ¶ 26.4). Thus, the Arbitrator clearly had the power to award attorney’s
fees. To the extent that Respondents contend that the Award does not represent a true
interpretation of Georgia contract law, the FAA does not allow for review of allegations
of legal error. White Springs, 2011 WL 4907386, at * 3.
Turning to the common law grounds alleged by Respondents, the Court finds
that these too must fail. Although recognized in the past, the Eleventh Circuit recently
held that judicially‐created grounds for vacatur are no longer valid in light of recent
Supreme Court precedent. Frazier, 604 F.3d at 1324 (citing Hall St. Assoc., LLC v.
Mattel, Inc., 552 U.S. 576, 587 (2008)). Thus, the four grounds for vacatur set forth in the
FAA are exclusive. Id. Respondents’ arguments that the Award is contrary to public
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policy, that it is arbitrary and capricious, that it is not based on the contract, and that it
displays a manifest disregard of the law must fail as a matter of law.
Conclusion
For the foregoing reasons, Respondents’ Counterclaim/Motion to Vacate
Arbitration Award [Doc. 7] is DENIED. Pursuant to 9 U.S.C. § 9, Petitioner’s
Application to Confirm Arbitration Award [Doc. 1] is hereby GRANTED.
SO ORDERED, this 28th day of November, 2011.
S/ C. Ashley Royal
C. ASHLEY ROYAL, CHIEF JUDGE
UNITED STATES DISTRICT COURT
AES/ssh
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