ROSS DRESS FOR LESS, INC. v. VIWY, L.P. et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JUAN R. SANCHEZ ON 9/19/17. 9/19/17 ENTERED AND COPIES EMAILED.(rf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
ROSS DRESS FOR LESS, INC.
VIWY, L.P., et al.
Juan R. Sánchez, J.
September 19, 2017
Plaintiff Ross Dress for Less moves for confirmation of an arbitration panel’s June 26,
2017, decision awarding Ross $1,800,018.69 on its breach of contract claim against Defendant
VIWY, L.P. VIWY moves to vacate the arbitration award, arguing the arbitration panel (Panel)
failed to properly apply the statute of limitations to Ross’s claim. For the reasons discussed
below, the Court will grant Ross’s motion to confirm the arbitration award, and deny VIWY’s
motion to vacate.
In 2007, Ross and VIWP entered into a written lease agreement (the Lease), which
contained a co-tenancy clause providing that Ross, a tenant in the retail shopping center owned
by VIWP, would be entitled to pay a reduced “Substitute Rent” during any “Secondary Reduced
Occupancy Period,” i.e., a period, at any point after the commencement of the Lease, when
specific nationally recognized retailers, or a specified number of retailers, are not open and
operating at the shopping center. 1 Compl. Ex. A at § 6.1.3(a)-(c).
On March 14, 2011, Ross,
having determined that a Secondary Reduced Occupancy Period had occurred two years earlier
without a corresponding rent reduction, made a written demand to VIWY for reimbursement of
its two-year overpayment, but VIWY denied Ross’s request. Ross nevertheless began offsetting
The Lease obligates the landlord to notify the tenant of “any Reduced Occupancy Period.”
Compl. Ex. A at § 6.1.3(a).
its overpayment by paying Substitute Rent, and continued to do so through September 2011,
when VIWY terminated the Lease.
Ross commenced this action in federal court on January 11, 2012, alleging VIWY
breached the terms of the Lease by failing to notify Ross that a Secondary Reduced Occupancy
Period had occurred beginning in March 2009, causing Ross to overpay its rent from March 2009
through September 2011. VIWY filed a motion to dismiss and compel arbitration, contesting the
occurrence of a Secondary Reduced Occupancy and arguing Ross had improperly offset its rent
from March 2011 through September 2011. The latter issue regarding the propriety of Ross’s
offset was an arbitrable issue pursuant to the arbitration clause in the Lease. See Compl. Ex. A at
On November 5, 2012, this Court issued an Order denying VIWY’s motion as to Ross’s
breach of contract claim, and staying VIWY’s arbitrable offset claim pending disposition of the
overpayment issue. VIWY filed a notice of appeal, and on January 10, 2013, this Court stayed
further proceedings pending resolution of the appeal. On July 1, 2014, the Third Circuit held the
entire case was arbitrable, and this Court ordered the parties to proceed to arbitration on all
claims, staying the case pending completion of the arbitration proceedings.
On March 20, 2015, Ross filed an arbitration demand with the American Arbitration
Association. The parties conducted discovery and filed cross-motions for summary judgment.
In its cross-motion, VIWY raised a statute of limitations defense, arguing Ross’s claim was time
barred because Ross filed its demand more than four years after becoming aware of the alleged
breach of contract. On January 10, 2017, the Panel denied VIWY’s statute of limitations
defense. Following a two-day arbitration hearing on March 13-14, 2017, the Panel rendered its
decision finding that VIWY “breached its contractual obligation to give Ross notice of a
Secondary Reduced Occupancy Period . . . during which Ross was continually entitled to a
substantially reduced monthly rent,” Pl.’s Mot. to Confirm Ex. A at 2, and awarding Ross
$1,800,018.69 in damages, interest, fees, and costs, id. at 7. Ross seeks confirmation of that
award pursuant to § 9 of the Federal Arbitration Act (FAA), 9 U.S.C. § 9. 2 VIWY argues the
award must be vacated, as the Panel failed to properly apply Pennsylvania’s four-year statute of
limitations to Ross’s breach of contract claim.
Under the FAA, “there is a strong presumption in favor of enforcing arbitration awards.”
Bapu Corp. v. Choice Hotels Int’l, Inc., 371 F. App’x 306, 308 (3d Cir. 2010). A court does “not
review [an] arbitrator’s decision for factual or legal error,” and will not vacate an award based on
“‘serious errors of law or fact’” so long as the arbitrator “‘makes a good faith attempt to
[interpret and enforce the contract].’” CD & L Realty LLC v. Owens Illinois, Inc., 535 F. App’x
201, 203 (3d Cir. 2013) (alterations in original) (quoting Sutter v. Oxford Health Plans LLC, 675
F.3d 215, 220 (3d Cir. 2012), aff’d, 133 S. Ct. 2064 (2013)). In effect, the arbitrator must have
“dispense[d] his own brand of industrial justice” to warrant vacatur.
Stolt–Nielsen S.A. v.
AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010). Indeed, a court “must grant” an order
confirming an arbitration award “unless the award is vacated, modified or corrected as prescribed
Section 9 of the FAA provides, in pertinent part:
If the parties in their agreement have agreed that a judgment of the court shall be
entered upon the award made pursuant to the arbitration, and shall specify the
court, then at any time within one year after the award is made any party to the
arbitration may apply to the court so specified for an order confirming the award,
and thereupon the court must grant such an order unless the award is vacated,
modified, or corrected as prescribed in sections 10 and 11 of this title. If no court
is specified in the agreement of the parties, then such application may be made to
the United States court in and for the district within which such award was made.
9 U.S.C. § 9.
in sections 10 and 11 of [the FAA].” 9 U.S.C. § 9; see Tenet HealthSystem Phila., Inc. v.
Rooney, No. 12-58, 2012 WL 3550496, at *1 (E.D. Pa. Aug. 17, 2012) (“‘[M]indful of the strong
federal policy in favor of commercial arbitration, [Courts must] begin with the presumption that
the award is enforceable,’ and must confirm the award unless grounds exist for vacating the
award pursuant to Section 10 of the FAA” (alterations in original) (quoting Sutter, 675 F.3d at
A court may vacate an arbitrator’s decision “only under exceedingly narrow
circumstances.” Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003). The FAA permits a
district court to vacate an arbitration award in four circumstances:
(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; (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
9 U.S.C. § 10. Courts have also set aside arbitration awards when an arbitrator’s actions
constitute a “manifest disregard of the law,” a judicially-created standard, see Dluhos, 321 F.3d
at 369, though the viability of this basis for setting aside an arbitration award is unclear
following the United States Supreme Court’s 2008 decision in Hall Street Assoc., L.L.C. v.
Mattel, Inc., 552 U.S. 576 (2008). 3
Prior to Hall Street, every Court of Appeals had held an arbitration panel’s decision could be
vacated based on the panel’s manifest disregard for the law. See Paul Green Sch. of Rock Music
Franchising, LLC v. Smith, 389 F. App’x 172, 176 (3d Cir. 2010). In Hall Street, the Supreme
Court held that § 10 of the FAA provides the exclusive grounds for vacatur of an arbitration
award, see 552 U.S. at 586, but did not “clearly state whether ‘manifest disregard’ survived as a
judicial . . . ground for vacatur,” Smith, 389 F. App’x at 176 n.5. Following Hall Street, there
exists a circuit split as to whether manifest disregard of the law remains a valid ground for
VIWY argues the Panel’s award must be vacated because the Panel’s decision regarding
the statute of limitations constituted manifest disregard of state law and the Third Circuit’s July
1, 2014, Opinion directing this Court to enforce the arbitration clause in the Lease. Even
assuming manifest disregard of the law remains a valid ground for vacating an arbitration award,
the Panel here did not manifestly disregard Pennsylvania’s statute of limitations or the Third
A party seeking vacatur of an arbitration panel’s award on the ground of manifest
disregard of the law must demonstrate that the arbitrators “(1) knew of the relevant legal
principle, (2) appreciated that this principle controlled the outcome of the disputed issue, and (3)
nonetheless willfully flouted the governing law by refusing to apply it.” Paul Green Sch. of
Rock Music Franchising, LLC v. Smith, 389 F. App’x 172, 176 (3d Cir. 2010). A court “may not
reevaluate supposed inconsistencies in the arbitrator’s logic or review the merits of the
arbitrator’s decision.” Local 863 Int’l Bhd. of Teamsters v. Jersey Coast Egg Producers, Inc.,
773 F.2d 530, 533 (3d Cir. 1985). The “manifest disregard” doctrine “is to be used only [in]
those exceedingly rare circumstances where some egregious impropriety on the part of the
arbitrators is apparent, but where none of the [vacatur] provisions of the [FAA] apply.” Black
Box Corp. v. Markham, 127 F. App’x 22, 25 (3d Cir. 2005) (alterations in original) (internal
quotation marks and citation omitted). VIWY “bears the burden of proving that the arbitrators
vacatur, and the Third Circuit “has not yet entered that debate.” Id. at 176-77; see Whitehead v.
Pullman Group, LLC, 811 F.3d 116, 121 (3d Cir. 2016) (noting the Third Circuit “has not yet
weighed-in” on the circuit split that has developed since Hall Street). Courts within this Circuit
have taken inconsistent views on this issue. Compare Knabb Partnership v. Home Income
Equity, LLC, No. 12-373, 2017 WL 1397247, at *2 (E.D. Pa. Apr. 19, 2017) (“I will . . . assume
without deciding that manifest disregard of the law remains a viable basis for vacatur”) with
Royal Bank Am. V. Kirkpatrick, Nos. 11-1058, 11-1112, 2011 WL 4528349, at *4 (E.D. Pa. Sept.
30, 2011) (“We conclude that given the observation of the Hall Street Court, manifest disregard
is not an independent basis for vacating an arbitration award.”).
were fully aware of the existence of a clearly defined governing legal principle, but refused to
apply it, in effect, ignoring it.” Id.
In considering VIWY’s statute of limitations defense, the Panel concluded:
Pennsylvania law is unsettled as to whether its Statute of Limitations must be
applied in private binding arbitration proceedings or whether applying the Statute
is left to the discretion of the arbitration tribunal. We need not decide that issue.
If the Statute were applied, we find that it was tolled when ROSS initiated its case
in the federal district court.
Section 20.2.1 of the Lease states:
‘All disputes, the monetary value of which exceeds Fifty Thousand Dollars
($50,000), or which involve an equitable remedy, shall first require the utilization
of Mediation as provided in Section 20.2.2 below. All disputes, the monetary
value of which is Fifty Thousand Dollars ($50,000) or less shall be settled by
arbitration as discussed in Section 20.2.3 below.’
The monetary value of this dispute exceeds Fifty Thousand Dollars ($50,000) and
it did not settle in mediation.
Section 20.2.2 states:
‘If the Dispute or any part thereof has not been resolved by mediation . . . the
Dispute shall be determined by suit or action in court, unless it is a matter for
arbitration as described in Section 126.96.36.199 above.’
The monetary value of this dispute is not less than $50,000 and it did not settle in
mediation. It is not ‘a matter for arbitration as described in Section 188.8.131.52’ of
the Lease. Therefore, ROSS complied with the Lease by initiating the Court
Action, thereby tolling the Pennsylvania Statute of Limitations, if it is applicable
to this private binding arbitration proceeding.
Further, VIWY having prevailed in moving the federal district court to send the
dispute to private binding arbitration, after the 4 year statutory period, cannot now
successfully argue that ROSS’ claim is barred by the Pennsylvania Statute of
ROSS timely filed the Court Action in January, 2012 and has never stopped
pursuing the Action. The purposes behind the Pennsylvania Statute of
Limitations are not violated by allowing ROSS claim to proceed.
Pl.’s Mot. to Confirm Ex. B at 5-6. The Panel thus found Ross’s timely filing of its complaint
asserting a breach of contract claim in federal court in January 2012 tolled the statute of
limitations as to that claim.
VIWY maintains that Ross—having charged VIWY with breach of contract by letter
dated March 14, 2011—was required to file its arbitration demand no later than March 14, 2015.
Thus, because Ross filed its demand for arbitration on March 20, 2015, its breach of contract
claim is time-barred as a matter of law. VIWY further argues that because the Third Circuit held
that Ross’s breach of contract claim—including the overpayment and offset issues—should be
resolved through arbitration, Ross’s filing of its federal complaint did not toll the statute of
limitations. By finding otherwise, VIWY argues, the Panel disregarded the Third Circuit’s
decision “establishing that the only forum in which Ross could properly bring its breach of
contract claim was arbitration,” and misapplied the Pennsylvania statute of limitations. Def.’s
Mem. in Opp’n 10. The Third Circuit, however, did not explicitly rule that Ross brought its
claim in the wrong forum, but instead held that because the overpayment and offset issues turned
on the same underlying question of fact and were therefore inextricably linked, the “presumption
of arbitrability militate[d] in favor of resolving both in arbitration.” 4 Ross Dress for Less, Inc. v.
VIWY, L.P., 570 F. App’x 123, 126 (3d Cir. 2014). In so holding, the Third Circuit confirmed
this Court had jurisdiction over the matter. 5 See id. at 125 n.2. Thus, it is not evident to this
As Ross points out, VIWY’s offset claim—the arbitrable issue—was not raised until VIWY
filed its motion to dismiss in this Court; when Ross filed its Complaint, there was no arbitrable
issue pursuant to the terms of the Lease, as the damages alleged were above $50,000. See Pl.’s
Mot. to Confirm Ex. C at § 20.2.1-.2 (providing that where a dispute cannot be resolved by
mediation, the dispute “shall be determined by suit or action in court,” unless it has a monetary
value of $50,000 or less and is thus a matter for arbitration).
Indeed, this Court has maintained jurisdiction over this matter even during the pendency of the
arbitration proceedings. See Order, July 23, 2014, ECF 28 (staying case pending completion of
Court that the Panel misapplied the statute of limitations under Pennsylvania law or ignored the
Third Circuit’s opinion by finding the statute of limitations was tolled when Ross filed its
Complaint. Notably, VIWY has failed to present any case law indicating a timely filed federal
complaint, containing a claim that is ultimately deemed arbitrable, does not toll the statute of
limitations.6 Without clearly defined legal precedent on point, the Court cannot find the Panel
manifestly disregarded law. See Black Box Corp., 127 F. App’x at 25; see also Cacace Assocs.
v. S. N.J. Bldg. Laborers Dist. Council, No. 07-5955, 2009 WL 424393, at *5 n.4 (D.N.J. Feb.
19, 2009) (refusing to “vacate an arbitration award over a mere disagreement over the correct
application of law” where plaintiff “fail[ed] to enunciate a clear, explicit legal rule that the
Arbitrator acknowledged and subsequently disregarded in making his decision”); Jeffrey M.
Brown Assocs. v. Allstart Drywall & Acoustics, Inc., 195 F. Supp. 2d 681, 684 (E.D. Pa. 2002)
(“Other courts have held that the ‘manifest’ disregard principle means that the correct legal
standard must have been so obvious that the typical arbitrator would readily and instantly have
perceived it, the arbitrator must have been subjectively aware of that standard, and he must have
arbitration proceedings and directing the parties to submit a joint report on the status of the
arbitration proceedings every 90 days until the proceedings had concluded); see also Lloyd v.
HOVENSA, LLC, 369 F.3d 263, 270 (3d Cir. 2004) (noting that a district court “has a significant
role to play under the FAA even in those instances in which the District Court orders the
arbitration of all claims,” as “[e]ven in those instances, the parties are entitled to seek the Court’s
assistance during the course of arbitration” and “after an arbitration award is rendered, a party is
entitled to seek relief in the District Court in the form of a judgment on the award or an order
vacating or modifying the award”).
VIWY argues that, under Pennsylvania law, “if a plaintiff mistakes his remedy” and “during
the pendency of the action the limitations runs, the remedy is barred.” Def.’s Mem. in Opp’n 9
(quoting Royal-Globe Ins. Cos. v. Hauck Mfg. Co., 335 A.2d 460, 462 (Pa. Super. Ct. 1975),
citing other Pennsylvania cases). However, the cases cited by VIWY stand for the principle that
an action in state court does not toll the running of the statute of limitations against a subsequent
action in federal court, and vice versa. Again, the Court finds Ross did not “mistake [its]
remedy” by filing in federal court, as it is not clear Ross had no remedy for the sole overpayment
issue it brought in federal court, and the Court retained jurisdiction over the matter, with the
authority to affirm or vacate the Panel’s decision.
proceeded to ignore that standard in fashioning the award.”); Aetna Cas. & Sur. Co. v. Dravo
Corp., No. 97-149, 1997 WL 560134, at *2 (E.D. Pa. July 31, 1997) (“In certain circumstances,
the governing law may have such widespread familiarity, pristine clarity, and irrefutable
applicability that a court could assume the arbitrators knew the rule and, notwithstanding, swept
it under the rug.” (quoting Advest, Inc. v. McCarthy, 914 F.2d 6, 10 (1s Cir. 1990))).
Even if this Court were to find the Panel improperly applied the statute of limitations,
courts of appeals in other circuits have recognized this type of error typically falls short of a
manifest disregard of the law. See DeMartini v. Johns, No. 15-15205, 2017 WL 2466717, at *1
(9th Cir. June 7, 2017) (“We cannot conclude from the record that the arbitrator’s decision—
while perhaps an erroneous application of the California statute of limitations for legal
malpractice claims—constitutes a ‘manifest disregard’ of law.”); Cooper v. WestEnd Capital
Mgmt., L.L.C., 832 F.3d 534, 546 (5th Cir. 2016) (“Even assuming the Arbitrator erred in
applying the statute of limitations (which is certainly not clear from the record), that ‘mere
mistake’ would not justify vacatur.”); Raymond James Fin. Servs., Inc. v. Fenyk, 780 F.3d 59, 66
(1st Cir. 2015) (“[A]ny error by the panel in refusing to dismiss [plaintiff’s] claims as untimely
does not rise to the level necessary to justify vacatur.”). Thus, any misapplication of the statute
of limitations does not warrant vacatur. 7
VIWY relies on Hasbro, Inc. v. Amron, 419 F. Supp. 2d 678 (E.D. Pa. 2006), in arguing the
Panel’s failure to properly apply the statute of limitations constituted manifest disregard of the
law. See Def.’s Mem. in Opp’n 7. In Hasbro, the court concluded the panel’s “failure to
properly apply the statute of limitations . . . [rose] beyond a simple error of law to a manifest
disregard of the law because if petitioners’ counterclaim were barred by the statute of limitations,
it had no cause of action.” 419 F. Supp. 2d at 689. VIWY’s reliance on Hasbro is misplaced.
The Hasbro court found the claims at issue were clearly barred by the statute of limitations; the
case did not involve claims that had been timely filed in a different forum. Even if this Court
were to find the Panel in this case improperly applied the statute of limitations, the Court is not
convinced the Hasbro court correctly applied the high level of deference owed to arbitrators’
VIWY further argues the Panel exceeded its powers under § 10(a)(4) by “irrationally”
ignoring the applicable statute of limitations under Pennsylvania law. A panel of arbitrators
exceeds its powers and “subjects [its] award to judicial vacatur” where it “decides an issue not
submitted to [it], grants relief in a form that cannot be rationally derived from the parties’
agreement and submissions, or issues an award that is so completely irrational that it lacks
support altogether.” Sutter, 675 F.3d at 219–20. A party seeking relief under § 10(a)(4) “bears a
heavy burden,” as it must show the arbitrator acted “outside scope of his contractually delegated
authority,” such as by “issuing an award that simply reflect[s] [his] own notions of [economic]
justice rather than draw[ing] its essence from the contract.”
Sutter, 133 S. Ct. at 2068
(alterations in original). Indeed, the irrationality standard is so deferential that a court “may not
overrule an arbitrator simply because [it] disagree[s];” rather, “[t]here must be absolutely no
support at all in the record justifying the arbitrator’s determinations for a court to deny
enforcement of an award.” Ario v. Underwriting Members of Syndicate 53 at Lloyds for 1998
Year of Account, 618 F.3d 277, 295–96 (3d Cir. 2010).
The Panel performed a careful analysis of VIWY’s statute of limitations defense,
considering the language of the Lease and the parties’ actions as they pertained to the statute of
limitations. As such, the Panel’s reasoning was not irrational. Nor did the Panel assume a power
that was not bestowed upon it. Cf. Stolt-Nielsen, 559 U.S. at 673-74 (holding arbitration panel
exceeded its powers under § 10(a)(4) where the it “proceeded as if it had the authority of a
common-law court to develop what it viewed as the best rule to be applied”). The Court
therefore declines to vacate the arbitration award pursuant to § 10(a)(4).
decisions, as applied by other courts considering this same issue. See DeMartini, 2017 WL
2466717, at *1; Cooper, 832 F.3d at 546; Fenyk, 780 F.3d at 66.
Because VIWY has failed to carry its heavy burden of showing the Panel’s award
warrants vacatur, its Motion to Vacate will be denied, and Ross’s Motion to Confirm will be
granted. An appropriate Order follows.
BY THE COURT:
/s/ Juan R. Sánchez
Juan R. Sánchez, J.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?