AMERIPRIS BANK, FSB v. PNC BANK, NATIONAL ASSOCIATION
Filing
17
MEMORANDUM OPINION indicating that, for reasons more fully stated within, PNCs motion to dismiss 10 will be denied; that the order proposed by Ameriprise will be entered. Signed by Judge Nora Barry Fischer on 11/26/12. (jg)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
AMERIPRISE BANK, FSB,
Plaintiff,
v.
PNC BANK, NATIONAL
ASSOCIATION,
Defendant.
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Civil Action No. 12-1113
Judge Nora Barry Fischer
MEMORANDUM OPINION
I.
Introduction
Pending before the Court are an application1 to confirm an arbitral award filed by the
Plaintiff and a motion to dismiss filed by the Defendant. Docket Nos. 1 & 10. For the reasons
that follow, the motion to dismiss will be denied. Docket No. 10. The application for an order
confirming the award will be granted, and the order proposed by the Plaintiff will be entered.
Docket Nos. 1 & 1-1.
II.
Background
PNC Bank, National Association (“PNC”), is a national banking association with its
principal office in Wilmington, Delaware. Docket No. 1 at ¶ 3. American Express Travel
Related Services Company, Inc. (“AMEX Travel”), and American Express Bank, FSB (“AMEX
Bank”), are subsidiaries of American Express Company (“American Express”). Id. at ¶ 8, n. 1.
Pursuant to agreements with AMEX Travel and AMEX Bank executed on June 26, 2000, and
June 30, 2004, PNC originated and serviced home equity lines of credit for AMEX Bank. Id. at
1
Although the application appears as a “complaint,” it must be considered “in the manner provided by law for the
making and hearing of motions.” 9 U.S.C. § 6; Termorio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 940 (D.C.
Cir. 2007); IFC Interconsult, AG v. Safeguard International Partners, LLC, 438 F.3d 298, 308 (3d Cir. 2006).
1
8. Ameriprise Bank, FSB (“Ameriprise”), is a federal savings bank with its principal office in
Minneapolis, Minnesota. Id. at ¶ 2. AMEX Bank’s loan portfolio was transferred to Ameriprise
in 2006. Id. at ¶ 9. The transfer followed the spinoff of Ameriprise’s parent company,
Ameriprise Financial, Inc., to the shareholders of American Express. Id.
After the spinoff, Ameriprise learned that PNC had committed various errors relating to
the origination and servicing of some loans. Id. at ¶ 10. These errors caused Ameriprise to
suffer damages. Id. In a letter dated January 12, 2009, Ameriprise demanded that PNC mitigate
the resulting damages or indemnify Ameriprise pursuant to the terms of the agreements. Id. at ¶
11. PNC refused to honor Ameriprise’s demand. Id.
The agreements specified that disputes arising thereunder were to be arbitrated before the
American Arbitration Association (“AAA”). Id. at ¶ 12. Ameriprise initiated arbitration
proceedings against PNC on July 23, 2009. Id. at ¶ 13. A commercial arbitration tribunal
consisting of three members was convened to consider Ameriprise’s claims. Docket No. 1-7 at
2-8. The tribunal received evidence pertaining to alleged mistakes involving forty-six different
loans. Id. at 2. Ameriprise’s claims concerning thirty-seven of the loans were denied. Id. at 5.
The tribunal awarded Ameriprise a total of $443,863.48 for servicing errors involving eight of
the remaining nine loans.2 Id. at 4-5. Ameriprise was instructed to assign its rights under those
loans to PNC upon receipt of the amounts awarded. Id. at 5.
The outstanding claim asserted by Ameriprise stemmed from mistakes connected to a
loan issued to Denise Workman (“Workman”) on October 13, 2004. Docket No. 1 at ¶ 6. The
claim had “an estimated value of not less than $100,283.15, excluding interest and costs.” Id. In
the portion of its decision discussing that loan, the tribunal stated:
2
The damages resulting from the servicing errors were separately valued at $105,000.00, $24,483.79, $72,376.19,
$89,242.00, $1,805.83, $49,453.69, $53,740.86, and $47,761.12. Docket No. 1-7 at 4.
2
With respect to the Workman Loan, should the origination error of misidentifying
the property result in a claim against Ameriprise for refund of the amount
received, PNC, upon notice from Ameriprise shall undertake any necessary
defense and indemnification of Ameriprise.
Docket No. 1-7 at 5. No monetary award was provided for the mistake involving that loan.
In a letter dated May 1, 2012, Ameriprise informed PNC that it had decided not to assign
its rights under one of the eight loans for which damages had been awarded. Docket No. 1-8 at
2. PNC was relieved of its obligation to pay the award connected with that loan, which was
equal to $72,376.19. Id. Ameriprise requested that PNC pay the remaining $371,487.29 that had
been awarded by the tribunal. Id. at 3. In addition, Ameriprise expressed its intention “to
memorialize PNC’s indemnification obligation with respect to the Workman loan” by seeking
confirmation of the tribunal’s award. Id. at 2. On May 15, 2012, PNC paid Ameriprise
$371,487.29 to satisfy its monetary obligations under the tribunal’s decision. Docket No. 1 at ¶
18. Ameriprise’s rights under the seven loans for which payments had been made were assigned
to PNC. Id.
Ameriprise commenced this action on August 7, 2012, seeking confirmation of PNC’s
obligations under the arbitral award pertaining to the loan issued to Workman. Id. at ¶ 6. On
September 6, 2012, PNC moved for the dismissal of this action pursuant to Federal Rules of
Civil Procedure 12(b)(1) and 12(b)(6).3 Docket No. 10. Ameriprise’s application for
confirmation and PNC’s motion to dismiss will both be addressed in this memorandum opinion.
III.
Standards of Review
A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(1) challenges
a court’s subject-matter jurisdiction over the plaintiff’s claims. FED. R. CIV. P. 12(b)(1). “At
3
The Federal Rules of Civil Procedure govern proceedings under the Federal Arbitration Act (“FAA”) [9 U.S.C. § 1
et seq.] except to the extent that the FAA provides for the use of “other procedures.” FED. R. CIV. P. 81(a)(6)(B).
3
issue in a Rule 12(b)(1) motion is the court’s ‘very power to hear the case.’” Judkins v. HT
Window Fashions Corp., 514 F.Supp.2d 753, 759 (W.D.Pa. 2007), quoting Mortensen v. First
Federal Savings & Loan Association, 549 F.2d 884, 891 (3d Cir. 1977). As the party asserting
that jurisdiction exists, the plaintiff bears the burden of showing that his or her claims are
properly before the court. Development Finance Corp. v. Alpha Housing & Health Care, 54
F.3d 156, 158 (3d Cir. 1995). In reviewing a Rule 12(b)(1) motion, a court must determine
whether the attack on its jurisdiction is a facial attack or a factual attack. A facial attack
challenges the sufficiency of the plaintiff’s pleadings on jurisdictional grounds. Petruska v.
Gannon University, 462 F.3d 294, 302, n. 3 (3d Cir. 2006). When considering a facial attack, a
court must accept the allegations contained in the plaintiff’s complaint as true. Id. A factual
attack on the court’s jurisdiction must be treated differently. Id. When considering a factual
attack, the court does not attach a presumption of truthfulness to the plaintiff’s allegations, and
the existence of disputed material facts does not preclude the court from deciding for itself
whether jurisdiction over the plaintiff’s claims can be properly exercised. Mortensen, 549 F.2d
at 891.
In light of the United States Supreme Court’s decision in Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), a complaint may be dismissed pursuant
to Federal Rule of Civil Procedure 12(b)(6) if it does not allege “enough facts to state a claim to
relief that is plausible on its face.” Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir.
2008), quoting Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173
L.Ed.2d 868 (2009). This standard requires more than “a formulaic recitation of the elements of
4
a cause of action.” Twombly, 550 U.S. at 555. The complaint must allege a sufficient number of
facts “to raise a right to relief above the speculative level.” Id. This requirement is designed to
facilitate the notice-pleading standard of Federal Rule of Civil Procedure 8(a)(2), which requires
“a short and plain statement of [a] claim showing that the pleader is entitled to relief.” FED. R.
CIV. P. 8(a)(2)(emphasis added).
In considering a motion to dismiss filed pursuant to Rule 12(b)(6), a court accepts all of
the plaintiff’s allegations as true and views all reasonable inferences drawn from those
allegations in the light most favorable to the plaintiff. Buck v. Hampton Township School
District, 452 F.3d 256, 260 (3d Cir. 2006). Nonetheless, a court need not credit bald assertions,
unwarranted inferences, or legal conclusions cast in the form of factual averments. Morse v.
Lower Merion School District, 132 F.3d 902, 906, n. 8 (3d Cir. 1997). The primary question in
deciding a motion to dismiss is not whether the plaintiff will ultimately prevail, but rather
whether he or she is entitled to offer evidence to establish the facts alleged in the complaint.
Maio v. Aetna, 221 F.3d 472, 482 (3d Cir. 2000). The purpose of a motion to dismiss is to
“streamline[] litigation by dispensing with needless discovery and factfinding.” Neitzke v.
Williams, 490 U.S. 319, 326-327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). In addition to the
allegations contained in the complaint, a court may consider matters of public record, exhibits
attached to the complaint, and other items appearing in the record of the case. Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384, n. 2 (3d Cir. 1994).
IV.
Discussion
This matter is before the Court pursuant to the Federal Arbitration Act (“FAA”) [9 U.S.C.
§ 1 et seq.]. Section 2 of the FAA provides that “[a] written provision in any maritime
transaction or a contract evidencing a transaction involving commerce to settle by arbitration a
5
controversy thereafter arising out of such contract or transaction, or the refusal to perform the
whole or any part thereof, or an agreement in writing to submit to arbitration an existing
controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.”4 9 U.S.C. § 2. The United States Supreme Court has construed the phrase “involving
commerce” broadly enough to extend the FAA’s reach to the limits of Congress’ power under
the Commerce Clause.5 Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 268277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). The Supreme Court has also interpreted the phrase
“evidencing a transaction” to reach contracts concerning transactions that turn out to affect
interstate commerce “in fact,” even if the parties to those contracts “did not contemplate an
interstate commerce connection.” Id. at 281. Since the contracts at issue in this case evidenced
transactions “involving commerce,” the dispute between the parties must be considered in
accordance with the FAA.
The FAA includes provisions governing the enforcement of arbitral awards. 9 U.S.C. §§
9-13. Ameriprise’s application for confirmation is before the Court pursuant to § 9 of the FAA,
which provides:
§ 9. Award of arbitrators; confirmation; jurisdiction; procedure
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
4
This statutory provision “‘appli[es] in state as well as federal courts’ and ‘foreclose[s] state legislative attempts to
undercut the enforceability of arbitration agreements.’” Preston v. Ferrer, 552 U.S. 346, 353, 128 S.Ct. 978, 169
L.Ed.2d 917 (2008)(brackets in original), quoting Southland Corp. v. Keating, 465 U.S. 1, 16, 104 S.Ct. 852, 79
L.Ed.2d 1 (1984).
5
The applicable language of the United States Constitution gives Congress the power “To regulate Commerce with
foreign Nations, and among the several States, and with the Indian Tribes.” U.S. CONST., ART. I, § 8. The FAA
defines the term “commerce” as “commerce among the several States or with foreign nations, or in any Territory of
the United States or in the District of Columbia, or between any such Territory and another, or between any such
Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign
nation,” excluding “contracts of employment of seamen, railroad employees, or any other class of workers engaged
in foreign or interstate commerce.” 9 U.S.C. § 1.
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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 [9 U.S.C. §§
10, 11]. 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. Notice of the application shall be served upon the
adverse party, and thereupon the court shall have jurisdiction of such party as
though he had appeared generally in the proceeding. If the adverse party is a
resident of the district within which the award was made, such service shall be
made upon the adverse party or his attorney as prescribed by law for service of
notice of motion in an action in the same court. If the adverse party shall be a
nonresident, then the notice of the application shall be served by the marshal of
any district within which the adverse party may be found in like manner as other
process of the court.
9 U.S.C. § 9. A judgment entered pursuant to § 9 has “the same force and effect” as “a judgment
in an action,” and “may be enforced as if it had been rendered in an action in the court in which it
is entered.” 9 U.S.C. § 13.
Confirmation of an arbitral award is available under § 9 only if the parties “have agreed
that a judgment of the court shall be entered upon the award made pursuant to the arbitration.” 9
U.S.C. § 9. Federal courts have disagreed as to how explicit an “agreement” must be in order to
satisfy § 9’s statutory prerequisite to the entry of a judgment. Idea Nuova, Inc. v. GM Licensing
Group, Inc., 617 F.3d 177, 180-182 (2d Cir. 2010)(holding that parties agree to judicial
confirmation of final arbitral awards when they agree to be bound by “the AAA Commercial
Arbitration Rules,” which themselves provide for such confirmation); Milk Drivers, Dairy & Ice
Cream Employees v. Roberts Dairy, 294 F.Supp.2d 1050, 1055 (S.D.Iowa 2003)(discussing the
different approaches taken by federal courts to the issue while explaining that, in the Eighth
Circuit, “parties must have an express affirmative agreement providing for judicial confirmation
of an award” in order to satisfy § 9’s “agreement” requirement)(emphasis in original). The
written agreements executed by PNC and AMEX Travel on June 26, 2000, plainly provided that,
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in the event that the arbitration of a dispute resulted in an award, a “judgment upon the award
rendered by the arbitrator [could] be entered in any court having jurisdiction thereof.” Docket
No. 1-4 at 43; Docket No. 1-5 at 37. Given the clear and unambiguous language contained in
those agreements, § 9’s prerequisite has been satisfied even if it is assumed that an implicit
“agreement” would not suffice. Oklahoma City Associates v. Wal-Mart Stores, Inc., 923 F.2d
791, 795 (10th Cir. 1991)(declining to decide whether an implicit “agreement” could facilitate
confirmation because the party requesting confirmation had “failed to point out any language in
the arbitration clause that either explicitly or implicitly demonstrate[d] an intent of the parties to
have judgment entered on an arbitration award”).
Sections 10 and 11 of the FAA enumerate the grounds upon which a court may vacate,6
modify or correct7 an arbitral award. 9 U.S.C. §§ 10, 11. In Hall Street Associates, L.L.C. v.
Mattel, Inc., 552 U.S. 576, 578, 584, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), the Supreme
Court held that “§§ 10 and 11 provide[d] the FAA’s exclusive grounds for expedited vacatur and
modification,” and that those “statutory grounds” could not be “supplemented by contract.”
Discussing the interaction between § 9 and the “prescribed” grounds for vacatur and
modification, the Supreme Court went on to make the following observations:
[E]xpanding the detailed categories would rub too much against the grain of the §
9 language, where provision for judicial confirmation carries no hint of flexibility.
On application for an order confirming the arbitration award, the court “must
grant” the order “unless the award is vacated, modified, or corrected as prescribed
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An order vacating an arbitral award may be entered “where the award was procured by corruption, fraud, or undue
means;” “where there was evident partiality or corruption in the arbitrators, or either of them;” “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 “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)(1)-(4).
7
An order “modifying or correcting” an arbitral award may be entered “[w]here there was an evident material
miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred
to in the award[;]” “[w]here the arbitrators have awarded upon a matter not submitted to them, unless it is a matter
not affecting the merits of the decision upon the matter submitted[;]” or “[w]here the award is imperfect in matter of
form not affecting the merits of the controversy.” 9 U.S.C. § 11(a)-(c).
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in sections 10 and 11 of this title.” There is nothing malleable about “must
grant,” which unequivocally tells courts to grant confirmation in all cases, except
when one of the “prescribed” exceptions applies. This does not sound remotely
like a provision meant to tell a court what to do just in case the parties say nothing
else.
Hall Street, 552 U.S. at 587 (footnote omitted). The reasoning employed in Hall Street suggests
that a court having jurisdiction over a § 9 application must enter “an order confirming the award”
unless a statutory ground for vacatur or modification exists. 9 U.S.C. § 9.
Section 12 of the FAA provides that “[n]otice of a motion to vacate, modify, or correct an
award must be served upon the adverse party or his attorney within three months after the award
is filed or delivered.” 9 U.S.C. § 12. The FAA “does not permit the assertion of challenges to an
arbitration award in opposition to a motion to confirm the award after the three-month limitations
period has expired.” Jeereddi A. Prasad, M.D., Inc. v. Investors Associates, Inc., 82 F.Supp.2d
365, 367-368 (D.N.J. 2000), citing Service Employees International Union v. Office Center
Services, Inc., 670 F.2d 404, 409 (3d Cir. 1982). The award at issue in this case was “filed or
delivered” on August 11, 2011. Docket No. 1-7 at 6-8. The tribunal’s decision was favorable to
Ameriprise with respect to nine of the forty-six loans in question. Id. at 4-5. It was favorable to
PNC with respect to the remaining thirty-seven loans. Id. at 5. Neither party filed an application
for vacatur, modification or correction of the award during the three months immediately
postdating the tribunal’s decision. 9 U.S.C. §§ 10, 11. Therefore, the Court “must grant”
Ameriprise’s application for “an order confirming the award” if no jurisdictional defect exists.
Hall Street, 552 U.S. at 587.
Ameriprise seeks an order confirming the arbitration award solely with respect to PNC’s
defense and indemnification obligations in relation to the loan issued to Workman. Docket No. 1
at 5. The application filed by Ameriprise contains no language suggesting that PNC has failed to
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comply with the arbitration award, or that PNC has evinced an unwillingness to honor its
prospective obligations in connection therewith. Id. at ¶¶ 1-20. PNC contends that since it has
neither declined to fulfill its monetary obligations nor expressed a desire to avoid its prospective
obligations, no “Case” or “Controversy” exists within the meaning of Article III of the United
States Constitution. Docket No. 11 at 4-5.
“The judicial Power of the United States” extends only to actual “Cases” and
“Controversies.” U.S. CONST., ART. III, §§ 1, 2. A dispute does not constitute a justiciable
“Case” or “Controversy” unless the party seeking redress has the proper legal “standing” to do
so. Flast v. Cohen, 392 U.S. 83, 95, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). “In order for a
plaintiff to have Article III standing, he or she must establish that: (1) he or she has suffered an
“injury in fact” (i.e., an invasion of a legally protected interest that is both (a) concrete and
particularized and (b) actual or imminent, and not merely conjectural or hypothetical); (2) there
is a causal relationship between his or her injury and the alleged conduct of the defendant; and
(3) it is likely that the injury will be redressed by a decision rendered in his or her favor.” Burns
v. Alexander, 776 F.Supp.2d 57, 74 (W.D.Pa. 2011), citing Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). PNC argues that Ameriprise has
not suffered a redressable injury, since the terms of the arbitral award have not been violated.
Docket No. 11 at 4-5.
Ameriprise maintains that an order confirming the arbitral award can be entered in the
absence of a new controversy between the parties. Docket No. 13 at 2-3. In addition,
Ameriprise points out that if it had to wait for PNC to breach the terms of the award before
seeking confirmation, it would have to file an application beyond the one-year limitations period
prescribed by § 9. Id. at 5-6. The application in this case was filed four days before the first
10
anniversary of the award. Docket No. 1. Instead of waiting for a breach, Ameriprise apparently
acted before the expiration of § 9’s one-year limitations period.
“[T]here is a division of authority on the issue of whether the one-year limit is absolute.”
Hare v. Hosto & Buchan, PLLC, 774 F.Supp.2d 849, 853 (S.D.Tex. 2011). Some federal courts
have construed § 9’s use of the word “may” to mean that an application for confirmation can be
filed after the expiration of the one-year period. Val-U Construction Co. of South Dakota v.
Rosebud Sioux Tribe, 146 F.3d 573, 581 (8th Cir. 1998); Sverdrup Corp. v. WHC Constructors,
Inc., 989 F.2d 148, 150-156 (4th Cir. 1993). Nevertheless, in Cortez Byrd Chips, Inc. v. Bill
Harbert Construction Co., 529 U.S. 193, 198, 120 S.Ct. 1331, 146 L.Ed.2d 171 (2000), the
Supreme Court observed that the FAA’s use of the word “may” was “not necessarily conclusive
of congressional intent to provide for a permissive or discretionary authority.” Seizing on the
Supreme Court’s observation, the United States Court of Appeals for the Second Circuit has
construed § 9 to impose “a one-year statute of limitations on the filing of a motion to confirm an
arbitration award under the FAA.” Photopaint Technologies, LLC v. Smartlens Corp., 335 F.3d
152, 155-158 (2d Cir. 2003). Ameriprise asserts that its application for an order confirming the
arbitral award needed to be filed before the expiration of the one-year limitations period in order
to prevent its “right to seek indemnification” from becoming “unenforceable.” Docket No. 13 at
6.
PNC attempts to refute Ameriprise’s position by relying on the decisions holding that
confirmation applications may be filed after the expiration of the one-year period prescribed by §
9. Docket No. 16 at 3. PNC also points out that “Ameriprise’s attempt to ‘confirm’ the award
under the FAA is not the only remedy available to enforce the award.” Id. The Supreme Court
has suggested that parties relying on arbitral awards “may contemplate enforcement under state
11
statutory or common law.” Hall Street, 552 U.S. at 590. Since “[t]he FAA supplemented rather
than extinguished any previously existing remedies,” “an action at law remains a viable
alternative to confirmation proceedings under § 9.” Sverdrup Corp., 989 F.2d at 155. PNC
argues that the availability of alternative remedies makes it unnecessary for the award to be
“confirmed” at this time. Docket No. 16 at 3-4.
The provisions of the FAA should not be construed in such a way as to render certain
words or phrases superfluous. Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114-115, 121
S.Ct. 1302, 149 L.Ed.2d 234 (2001). This principle strongly counsels in favor of reading § 9 to
preclude the filing of a confirmation application more than a year after the date of an arbitral
award. Photopaint Technologies, 335 F.3d at 157-158. The alternative reading “fails to give
independent effect to” the language describing the one-year period. Circuit City Stores, 532 U.S.
at 114. For this reason, it appears that Ameriprise would have foreclosed resort to the
“streamlined treatment” available under the FAA if it had declined to file the instant application
on or before August 13, 2012.8 Hall Street, 552 U.S. at 582. Since the application was filed in a
timely manner, however, the Court has no occasion to consider whether a later application would
have been time-barred. It suffices to say that Ameriprise did not act unreasonably in seeking
confirmation of the arbitral award early enough to avoid a potential statute-of-limitations
problem.
The jurisdictional question does not turn on the reasonableness of Ameriprise’s actions.
Like any other litigant seeking relief in an Article III court, a party invoking the remedies
available under the FAA must demonstrate that a live “Case” or “Controversy” exists. StoltNielsen S.A. v. Animalfeeds International Corp., ___U.S.___, ___, 130 S.Ct. 1758, 1767, n. 2,
8
Since August 11, 2012, fell on a Saturday, Ameriprise could have filed the application on August 13, 2012. FED.
R. CIV. P. 6(a)(1)(C).
12
176 L.Ed.2d 605 (2010). The relevant question is whether an order confirming the portion of the
tribunal’s award concerning the loan issued to Workman would redress an actual injury suffered
by Ameriprise.
Some federal courts have held that “there must be some type of controversy necessitating
judicial enforcement of an [arbitral] award in order to justify its confirmation by court order.”
Local 2412 of the United Mine Workers of America v. Consolidation Coal Co., 682 F.Supp. 399,
400 (S.D.Ill. 1988). Courts adhering to that view generally focus on the enforcement or
implementation of an arbitral award rather than on the underlying dispute resolved by that award.
Derwin v. General Dynamics Corp., 719 F.2d 484, 491 (1st Cir. 1983)(“The present case
involves no such ‘new dispute’ to be distinguished (or not distinguished) from the one resolved
by the arbitrator.”); Steris Corp. v. International Union, United Automobile, Aerospace &
Agricultural Implement Workers of America, 489 F.Supp.2d 501, 515 (W.D.Pa. 2007)(following
“decisions from several jurisdictions holding that confirmation is improper in the absence of any
actual controversy regarding the validity of an award or compliance with it”). Other federal
courts have concluded that an order confirming an arbitral award may be entered even when
there is no “occasion warranting enforcement.” Insurdata Marketing Services, LLC v.
Healthplan Services, Inc., 352 F.Supp.2d 1252, 1255 (M.D.Fla. 2005). Courts taking the latter
position tend to focus on the underlying controversy resolved by an arbitral decision rather than
on the parties’ compliance with the decision itself. Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir.
2007). Even fully satisfied monetary awards have been confirmed by federal courts. Collins v.
D.R. Horton, Inc., 361 F.Supp.2d 1085, 1093 (D.Ariz. 2005)(“The mere fact that Horton has
satisfied a portion of its obligation under the arbitration award does not divest the court of
authority to confirm that portion of the award—satisfaction and confirmation are separate
13
issues.”); District Council No. 9 v. APC Painting, Inc., 272 F.Supp.2d 229, 239 (S.D.N.Y.
2003)(stating that whether arbitral awards have been satisfied “has no bearing on whether [they]
should be confirmed”). A similar split of authority has developed among state courts presented
with the question of whether an uncontested arbitral award may be confirmed. Courts in
Wyoming, Massachusetts and Washington have held that a request for confirmation becomes
moot when an arbitral award is satisfied. Stewart Title Guaranty Co. v. Tilden, 64 P.3d 739,
740-742 (Wyo. 2003); Murphy v. National Union Fire Insurance Co., 781 N.E.2d 1232, 12361237 (Mass. 2003); Kenneth W. Brooks Trust A. v. Pacific Media, L.L.C., 44 P.3d 938, 941-942
(Wash.Ct.App. 2002). In contrast, courts in Nebraska and Hawaii have entered orders
confirming satisfied awards.9 Drummond v. State Farm Mutual Automobile Insurance Co., 785
N.W.2d 829, 833-834 (Neb. 2010); Mikelson v. United Services Automobile Association, 227
P.3d 559, 561-567 (Haw.Ct.App. 2010).
In this case, the Court is not being asked to confirm a satisfied award. Ameriprise seeks
an order confirming only the portion of the award pertaining to PNC’s prospective defense and
indemnification responsibilities. Docket No. 1 at 5-6. The only question is whether Article III’s
“Case” or “Controversy” requirement is satisfied. U.S. CONST., ART. III, § 2. That question
must be considered in relation to the FAA’s statutory scheme.
Although the FAA “creates a body of federal substantive law establishing and regulating
the duty to honor an agreement to arbitrate,” “it does not create any independent federal-question
9
Although the jurisdictional limitations inherent in Article III apply only to federal courts, state courts in the five
relevant jurisdictions operate under similar constraints imposed by state law. Office of Hawaiian Affairs v. Housing
& Community Development Corp. of Hawaii, 219 P.3d 1111, 1118-1119 (Haw. 2009); Washington Education
Association v. Public Disclosure Commission, 80 P.3d 608, 613 (Wash. 2003); Director of the Office of State Lands
& Investments v. Merbanco, Inc., 70 P.3d 241, 246-248 (Wyo. 2003); U.S. Ecology, Inc. v. Dept. of Environmental
Quality, 601 N.W.2d 775, 779 (Neb. 1999); Commissioner of Correction v. Ferguson, 421 N.E.2d 444, 446 (Mass.
1981). Therefore, the state-court decisions discussing the effect that compliance or satisfaction may have on a
request for confirmation may inform the inquiry as to whether the Court has jurisdiction to enter the order sought by
Ameriprise in this case.
14
jurisdiction.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 25,
n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Section 4 of the FAA provides that “[a] party
aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written
agreement for arbitration may petition any United States district court which, save for such
agreement, would have jurisdiction under Title 28 [28 U.S.C. § 1 et seq.], in a civil action or in
admiralty of the subject matter of a suit arising out of the controversy between the parties, for an
order directing that such arbitration proceed in the manner provided for in such agreement.” 9
U.S.C. § 4. Interpreting this statutory provision in Vaden v. Discover Bank, 556 U.S. 49, 62, 129
S.Ct. 1262, 173 L.Ed.2d 206 (2009), the Supreme Court declared that “a federal court should
determine its jurisdiction by ‘looking through’ a § 4 petition to the parties’ underlying
substantive controversy.” Speaking through Justice Ginsburg, the Supreme Court explained that
a federal court presented with a § 4 petition must decide “whether the whole controversy
between the parties—not just a piece broken off from that controversy—is one over which the
federal courts would have jurisdiction.” Vaden, 556 U.S. at 67.
Admittedly, the instant case does not involve a petition to compel arbitration. 9 U.S.C. §
4. Instead, it involves an application for an order confirming a portion of the arbitral award
rendered by the tribunal. 9 U.S.C. § 9. Nonetheless, the jurisdictional question must still be
answered by reference to “the parties’ underlying substantive controversy” rather than in relation
to “a piece broken off from that controversy.” Vaden, 556 U.S. at 62, 67. In Smith v. Tele-Town
Hall, LLC, 798 F.Supp.2d 748 (E.D.Va. 2011), the United States District Court for the Eastern
District of Virginia observed:
[C]ourts should not ignore the broader context of the FAA and the important
relationship between arbitration and judicial resolution of disputes. When a party
moves to confirm, vacate, or modify an arbitration award, the controversy in issue
is not simply the arbitration award but also the underlying substantive claims.
15
Ignoring the underlying claims and focusing instead solely on the arbitration
award divorces the judicial process from the arbitration process in a manner
inconsistent with the FAA.
Smith, 798 F.Supp.2d at 756. Consistent with the logic adopted in Smith, the parties’
“underlying substantive claims” must control the jurisdictional inquiry. Id.
Ameriprise and PNC are “Citizens of different States” within the meaning of 28 U.S.C. §
1332(a)(1). Docket No. 1 at ¶¶ 1-3. It is beyond dispute that “the matter in controversy exceeds
the sum of $75,000, exclusive of interest and costs.”10 28 U.S.C. § 1332(a). The claim arising
out of the loan issued to Workman need not be separated from the parties’ broader dispute for the
purpose of determining whether the Court has jurisdiction to confirm the prospective award
stemming from that claim. Vaden, 556 U.S. at 69, n. 18 (remarking that “if a federal court would
have jurisdiction over the parties’ whole controversy,” there would be “nothing anomalous about
the court’s ordering arbitration of a state-law claim constituting part of that controversy”). The
statutory prerequisites for the exercise of jurisdiction are clearly satisfied. The Court does not
understand PNC to contend otherwise. PNC’s jurisdictional challenge is premised solely on the
alleged lack of a “Case” or “Controversy” under Article III. Docket No. 11 at 4-5; Docket No.
16 at 1-4.
Jurisdiction cannot be grounded on the fact that a “Case” or “Controversy” existed when
the arbitration proceedings were underway. Burns, 776 F.Supp.2d at 75. The “case-orcontroversy requirement” of the Constitution “subsists through all stages of federal judicial
proceedings.” Lewis v. Continental Bank Corp., 494 U.S. 472, 477, 110 S.Ct. 1249, 108 L.Ed.2d
10
Federal courts have disagreed as to whether the amount in controversy should be determined by reference to the
amount demanded in an arbitration proceeding, or whether it should be determined by reference to the amount
ultimately awarded by an arbitral tribunal. Karsner v. Lothian, 532 F.3d 876, 882 (D.C. Cir. 2008)(discussing the
different methods of calculation used by federal courts in determining whether the amount-in-controversy
requirement is satisfied in cases governed by the FAA’s post-award provisions). Since both amounts exceed
$75,000 in this case, the Court has no occasion to consider which approach is correct. Choice Hotels International,
Inc. v. Shiv Hospitality, 491 F.3d 171, 175-176 (4th Cir. 2007).
16
400 (1990). “[A] case is moot when the issues presented are no longer ‘live’ or the parties lack a
legally cognizable interest in the outcome.” Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct.
1944, 23 L.Ed.2d 491 (1969). “When a case becomes moot, a federal court is deprived of its
power to act, since there is nothing left for the court to remedy.” Burns, 776 F.Supp.2d at 75.
The foregoing principles, however, do not divest the Court of jurisdiction under the
present circumstances. An order confirming an arbitral award finalizes the redress for the injury
giving rise to the underlying controversy. Kalawaia v. AIG Hawaii Insurance Co., 977 P.2d 175,
180-183 (Haw. 1999). When provided for by the contracting parties, an “application for
confirmation and judgment is available as a speedy remedy to complement the otherwise
available, but more ponderous, remedy of complaint and judgment.” Insurdata Marketing
Services, 352 F.Supp.2d at 1255. In this respect, the controversy between the parties remains
live until the arbitral award is confirmed. Drummond, 785 N.W.2d at 833; Mikelson, 227 P.3d at
565-567. Consequently, a federal court constrained by Article III may confirm an award even in
the absence of a new dispute involving the award’s application or enforcement. Smith, 798
F.Supp.2d at 757; Collins, 361 F.Supp.2d at 1093; District Council No. 9, 272 F.Supp.2d at 239.
A federal court’s jurisdiction to enter an order confirming an arbitral award under § 9 is
somewhat similar to its jurisdiction to enter a consent decree. “A consent decree ‘embodies an
agreement of the parties’ and is also ‘an agreement that the parties desire and expect will be
reflected in, and be enforceable as, a judicial decree that is subject to the rules generally
applicable to other judgments and decrees.’” Frew v. Hawkins, 540 U.S. 431, 437, 124 S.Ct.
899, 157 L.Ed.2d 855 (2004), quoting Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367, 378,
112 S.Ct. 748, 116 L.Ed.2d 867 (1992). Although “a consent decree must spring from and serve
to resolve a dispute within the court’s subject-matter jurisdiction,” it is premised on the parties’
17
voluntary agreement to certain terms and conditions. Local Number 93, International
Association of Firefighters, AFL-CIO, C.L.C. v. City of Cleveland, 478 U.S. 501, 525, 106 S.Ct.
3063, 92 L.Ed.2d 405 (1986). The agreement provides the court with the authority to enter a
judgment. Lawyer v. Dept. of Justice, 521 U.S. 567, 579, n. 6, 117 S.Ct. 2186, 138 L.Ed.2d 669
(1997). Nevertheless, the consensual nature of the resolution does not render the underlying
controversy moot. League of United Latin American Citizens, District 19 v. City of Boerne, 659
F.3d 421, 435-437 (5th Cir. 2011).
When the parties to “a contract evidencing a transaction involving commerce” agree to
have any arbitral award arising thereunder entered as a judgment, § 9 provides a court with the
authority to enter an order confirming such an award. Isidor Paiewonsky Associates, Inc. v.
Sharp Properties, Inc., 998 F.2d 145, 154, n. 11 (3d Cir. 1993). The FAA’s statutory scheme
clearly contemplates the confirmation of uncontested awards. Although parties have only three
months to file applications for vacatur, modification or correction, they have a full year to file
applications for confirmation. 9 U.S.C. §§ 9, 12. The nine-month difference between these
limitations periods would serve no purpose if a court could confirm an arbitral award only in
response to a competing application for vacatur, modification or correction. Accordingly, an
order confirming the uncontested award in this case would not be inconsistent with the FAA.
In addition to challenging the Court’s subject-matter jurisdiction pursuant to Rule
12(b)(1), PNC moves for the dismissal of this action pursuant to Rule 12(b)(6). Docket No. 10 at
1; Docket No. 11 at 3-4. Ameriprise’s application for confirmation, however, is not subject to
the notice-pleading requirements of Rule 8(a)(2). Productos Mercantiles E Industriales, S.A. v.
Faberge USA, Inc., 23 F.3d 41, 46 (2d Cir. 1994); O.R. Securities, Inc. v. Professional Planning
Associates, Inc., 857 F.2d 742, 748 (11th Cir. 1988). The Federal Rules of Civil Procedure apply
18
to proceedings governed by the FAA only to the extent that the FAA does not prescribe “other
procedures.” FED. R. CIV. P. 81(a)(6)(B). Section 6 of the FAA plainly provides that
Ameriprise’s application for confirmation must be considered “in the manner provided by law
for the making and hearing of motions.” 9 U.S.C. § 6. The “complaint” filed by Ameriprise is a
§ 9 “application” rather than a “pleading.” IFC Interconsult, AG v. Safeguard International
Partners, LLC, 438 F.3d 298, 308-309 (3d Cir. 2006). It cannot be dismissed for failing “to state
a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6).
The sufficiency of an “application” for confirmation must be judged in relation to § 13 of
the FAA, which provides:
§ 13. Papers filed with order on motions; judgment; docketing; force and
effect; enforcement
The party moving for an order confirming, modifying, or correcting an award
shall, at the time such order is filed with the clerk for the entry of judgment
thereon, also file the following papers with the clerk:
(a) The agreement; the selection or appointment, if any, of an additional
arbitrator or umpire; and each written extension of the time, if any, within
which to make the award.
(b) The award.
(c) Each notice, affidavit, or other property used upon an application to
confirm, modify, or correct the award, and a copy of each order of the
court upon such an application.
The judgment shall be docketed as if it was rendered in an action.
The judgment so entered shall have the same force and effect, in all respects, as,
and be subject to all the provisions of law relating to, a judgment in an action; and
it may be enforced as if it had been rendered in an action in the court in which it is
entered.
9 U.S.C. § 13. Ameriprise’s filings conform to § 13 in all relevant respects. Docket No. 1 at ¶
20; Docket Nos. 1-3, 1-4, 1-5 & 1-7. No basis exists for dismissing the application.
According to PNC, the entry of an order confirming the arbitral award would “show up in
the judgment index” when title companies research PNC’s title status, thereby causing
“unnecessary delays or disputes concerning title to PNC’s properties as PNC explains the
19
absence of any liability to Ameriprise.” Docket No. 11 at 5. PNC contends that “the Court
should refuse to enter a judgment that will cloud PNC’s title in this way.” Id. at 6. Workman’s
deed of trust was apparently recorded in Los Angeles County, California, on December 6, 2004.
Docket No. 1 at 5. Ameriprise maintains that a judgment concerning “a single parcel of land in
Los Angeles County” will not “create a cloud on title affecting all of PNC’s properties.” Docket
No. 13 at 7.
PNC’s request for the exercise of discretion runs counter to the plain language of § 9,
“which unequivocally tells courts to grant confirmation in all cases, except when one of the
‘prescribed’ exceptions applies.” Hall Street, 552 U.S. at 587. No application for vacatur,
modification or correction was filed during the three-month limitations period. 9 U.S.C. § 12.
Indeed, PNC appears to concede that no basis for vacatur, modification or correction exists.
Docket No. 16 at 4. An order confirming the arbitral award is available to Ameriprise because of
unambiguous language contained in agreements to which PNC was a party. Docket No. 1-4 at
43; Docket No. 1-5 at 37. Under these circumstances, the Court “must grant” Ameriprise’s
application for an order confirming the relevant portion of the award rendered by the arbitral
tribunal. 9 U.S.C. § 9.
V.
Conclusion
For the foregoing reasons, PNC’s motion to dismiss will be denied. Docket No. 10. In
accordance with the clear mandate of § 9, Ameriprise’s application for an order confirming the
prospective portion of the arbitral award will be granted. Docket No. 1. No opinion is expressed
as to whether a federal court has jurisdiction to confirm satisfied monetary awards. Zeiler, 500
F.3d at 169; Collins, 361 F.Supp.2d at 1093; District Council No. 9, 272 F.Supp.2d at 239.
Since the relevant portion of the award was “clearly intended to have a prospective effect,” the
20
Court has no occasion to consider whether the satisfaction of PNC’s monetary obligations would
have otherwise mooted this case. Derwin, 719 F.2d at 491. The order proposed by Ameriprise
will be entered. Docket No. 1-1.
s/Nora Barry Fischer
Nora Barry Fischer
United States District Judge
Date: November 26, 2012
cc:
All counsel of record
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