Burbach Aquatics, Inc. v. Huntley Illinois, Park District
Filing
26
MEMORANDUM OPINION signed by the Honorable Charles P. Kocoras on 11/21/2012.Mailed notice(sct, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BURBACH AQUATICS, INC.,
Plaintiff,
vs.
HUNTLEY ILLINOIS PARK DISTRICT,
Defendant.
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12 C 6613
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
This matter comes before the Court on Plaintiff Burbach Aquatics, Inc.’s
(“Burbach”) motion to vacate an arbitration award. For the reasons set forth below, the
motion is denied.
BACKGROUND
Burbach is an architectural and engineering firm which specializes in designing
aquatic facilities. On December 10, 1999, Burbach’s predecessor in interest, Burbach
Municipal, entered into a written contact (“Contract”) with Huntley Illinois Park
District (“Huntley”), to provide engineering services for the design and construction of
a new municipal swimming pool and community center. Burbach performed under the
Contract and invoiced Huntley for the services they performed and reimbursable
expenses. Huntley paid Burbach for some, but not all of the invoices sent. The last
payment Huntley made to Burbach was on June 7, 2004. The Contract contained a
provision that called for disputes to be resolved in binding arbitration.
On January 26, 2012, Burbach sought the collection of the remaining unpaid
invoiced amounts through arbitration. Burbach filed a Demand for Arbitration in
accordance with the requirements of the Contract. In lieu of answering Burbach’s
Demand for Arbitration, Huntley filed a motion to dismiss the proceeding arguing it as
time barred.
Prior to the hearing Burbach chose the Fast Track Arbitration Procedure of the
Construction Industry Arbitration Rules (“Fast Track Arbitration”) which provides for
an expedited timetable to the hearing, a single hearing day, and an award in 14 days.
On May 17, 2012, an arbitration hearing was held before an arbitrator.
At the
arbitration hearing, Burbach offered evidence and testimony concerning the claimed
principal balance owed, the accrued interest on the principal and attorney’s fees which
it sought. Huntley did not offer any evidence, but did submit to the arbitrator case law
pertaining to Wisconsin’s six year statute of limitations, which Huntley argued barred
Burbach’s claims. After the close of evidence, both parties were allowed to give
closing remarks. During closing remarks Burbach asserted that the ten year Illinois
statute of limitations should apply.
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The arbitrator issued his final award finding in favor of Huntley on May 30,
2012. On October 3, 2012, Burbach filed an Amended Motion to Vacate the Arbitration
Award.
LEGAL STANDARD
Under the Federal Arbitration Act, the grounds for overturning an arbitration
award are “narrowly limited.” IDS Life Ins. Co. v. Royal Alliance Associates, Inc., 266
F.3d 645, 649 (7th Cir. 2001). The sole basis for vacating an arbitration award are
contained in 9 U.S.C. § 10(a). Affymax, Inc. v. Ortho-McNeil-Janssen Pharmaceuticals,
Inc., 660 F.3d 281, 284 (7th Cir 2011). That subsection allows a district court to vacate
an arbitration award if: 1) the award was procured by corruption or fraud; 2) there was
evident partiality in the arbitrator; 3) the arbitrator was guilty of misconduct in refusing
to hear evidence pertinent to the controversy; 4) the arbitrator exceeded their power.
9 U.S.C. § 10(a). District courts are not to engage in a judicial review of arbitration
awards. Wise v. Wachovia Securities, LLC, 450 F.3d 265, 269 (7th Cir. 2006). When
parties agree to arbitrate their disputes they opt out of the court system, which
consequently relegates their options to challenge an award. Id. “Factual or legal error,
no matter how gross, is insufficient to support overturning an arbitration award.” Halim
v. Great Gatsby’s Auction Gallery, Inc., 516 F.3d 557, 563 (7th Cir. 2008).
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Accordingly, the Court recognizes that it must grant an arbitrator’s decision great
deference. See Wallace v. Buttar, 378 F.3d 182, 189 (2d Cir. 2004).
DISCUSSION
Burbach asserts that the arbitration award should be vacated pursuant to
§ 10(a)(2) because the arbitrator demonstrated an evident partiality when he refused to
accept a memorandum submitted by Burbach and allowed Huntley to submit a case
supporting their position. Burbach contends that the partiality of the arbitrator can also
be evidenced in his refusal to give an explanation for his decision. Additionally,
Burbach argues that the arbitration award should be vacated pursuant to § 10(a)(3),
because the arbitrator exhibited a manifest disregard for the applicable law.
A. Partiality
Burbach contends that the evidentiary rulings made during the course of the
arbitration proceeding evidences the arbitrator’s partiality. Additionally Burbach
asserts that the arbitrator’s refusal to issue a reasoned opinion of the award constitutes
a clear indication of partiality. Burbach contends that these limited instances establish
proof that the arbitrator was unduly biased and partial to Huntley.
“To set aside an award for arbitration partiality, ‘[t]he interest or bias . . . must
be direct, definite and capable of demonstration rather than remote, uncertain or
speculative.” Health Svcs. Mgt. Corp. v. Hughes, 975 F.2d 1253, 1264 (7th Cir. 1992)
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(quoting Tamari v. Bache Halsey Stuart Inc., 619 F.2d 1196, 1200 (7th Cir. 1980)).
Absent bad faith or error, decisions to admit or exclude evidence are entirely at the
discretion of the arbitrator. See United Paperworks Int’l Union v. Misco, Inc., 484 U.S.
29, 40 (1987).
Burbach frames its argument for establishing the partiality of the arbitrator by
pointing to the evidentiary ruling made during the proceeding. Burbach exclusively
relies on the arbitrator’s acceptance of Huntley’s case law and conversely the denial of
Burbach’s memorandum in support of their position of partiality in violation of
§ 10(a)(2). Huntley refutes this assertion by pointing out that Burbach was allowed to
submit all of its witness and documentary evidence. However the sole issue Burbach
elicits to show the partiality of the arbitrator concerns a memorandum outlining their
theory of the applicable statute of limitations.
A review of the record shows that Burbach was aware of the limited filing
requirements of the arbitration proceeding and was allowed to submitted its theory of
the applicable case law to the arbitrator. According to the Fast Track Arbitration Rules,
briefs would not be entertained by the arbitrator unless both parties filed them. Prior
to the hearing, Burbach notified Huntley that they intended on filing a pre-hearing brief.
Huntley objected to this filing and on May 16, 2012 Burbach was again notified that
briefs would not be submitted unless both parties filed them. During the evidentiary
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portion of the arbitration proceeding, Burbach again attempted to submit their brief over
the objection of Huntley, which was refused by the arbitrator. Huntley, on the other
hand, was successful in submitting a single Wisconsin Supreme Court case addressing
its position on the applicable statute of limitations. Burbach did not make any attempt
to introduce case law during the hearing. After the close of evidence, the arbitrator
heard arguments from Burbach and Huntley. During its summation argument, Burbach
presented case authority for its position on the applicable Illinois statute of limitations,
which rebutted Huntley’s assertion.
The record reveals that the arbitrator was
exercising his discretion to manage the arbitration proceeding and Burbach had ample
opportunity to convey their position for the arbitrator to consider. The arbitrator did not
display partiality in admitting or denying evidence which justifies vacating the
arbitration award.
Additionally, Burbach briefly points to the arbitrator’s refusal to offer a reasoned
opinion for his award decision as evidence of his impartiality. It is well settled that an
arbitrator need not state the reasons for his decision. See Eljer Mfg. Inc. v. Kowin
Development Corp., 14 F.3d 1250, 1253-54 (7th Cir. 1994). Burbach proceeds with its
assertion but does not supplement its argument with any substantive facts which
substantiate their claim of partiality. Huntley directs the Courts attention to the fact the
Burbach chose the Fast Track Arbitration method, which does not provide for an
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opinion of the award. Also Burbach did not specifically choose the written method for
the award to be rendered prior to the conclusion of the hearing. The absence of a
formalized choice of a written opinion and the selection of the Fast Track Arbitration
proceeding, both by Burbach, completely eviscerates its retroactive assertion of
partiality on the basis of a lack of written opinion. The arbitrator did not show partiality
in refusing to convey his award decision in writing.
Burbach’s arguments concerning the partiality of the arbitrator are unconvincing
and do not constitute grounds for the vacatur of the award.
B. Manifest Disregard for the Law
Burbach argues that the arbitrator’s manifest disregard for the law constitutes
misconduct, justifying vacatur under to § 10(a)(3). The Seventh Circuit has defined an
arbitrator’s manifest disregard of the law so narrowly that it fits within the confines of
an arbitrator exceeding their powers under § 10(a)(4). Wise, 450 F.3d at 268. The
Court will assess Burbach’s arguments according to the § 10(a)(4) standard, in light of
the case law re-classifying their argument.
Burbach initially claims that the decision of the arbitrator was a manifest
disregard for the law. Burbach follows this claim with a separate argument that the
arbitrator erred in the application of the appropriate law in reaching the award decision.
As a mere error in the law is not sufficient to vacate an arbitration award, the Court will
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proceed only considering Burbach’s manifest disregard for the law argument. See Butler
Mfg. Co. v. United Steelworkers of Am., 336 F.3d 629, 636 (7th Cir. 2003).
“[T]he ‘manifest disregard’ principle is limited to two possibilities: an arbitral
order requiring the parties to violate the law, and an arbitral order that does not adhere
to the legal principles specified by contract, and hence unenforceable under § 10(a)(4).”
George Watts & Son, Inc. v. Tiffany & Co., 248 F.3d 577, 580 (7th Cir. 2001). Legal
errors by an arbitrator, even egregious errors, are not grounds for vacating the award.
Halim, 516 F.3d at 563.
Burbach does not argue that the arbitrator’s award directs the parties to violate
the law. Burbach solely argues that the arbitrator’s decision to apply the Wisconsin
statute of limitations as opposed to the Illinois statute of limitations represents a
manifest error of the law. Burbach merely states its position and does not point to any
contractual provision which the arbitrator failed to consider, as required under the
manifest disregard standard.
Huntley refutes Burbach’s argument by referring to the Contract between the
parties. The Contract specifies that the applicable state law shall be where the architect
maintains their principal place of business. Burbach contracted as the architect of the
water park and admits in its Amended Complaint that its principal place of business is
Platteville, Wisconsin. Accordingly, the arbitrator applied the legal principles agreed
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to in the Contract.
The Court is not persuaded that the arbitrators’ decision is
unenforceable by reason of manifest disregard of the law.
CONCLUSION
For the foregoing reasons, Burbach’s motion to vacate the arbitration award is
denied.
Charles P. Kocoras
United States District Judge
Dated:
November 21, 2012
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