While there was not much action late last week or yesterday, we have a useful case for those seeking to vacate or modify an arbitration award and some SCOTUS-related matters.
Stay Pending SCOTUS Action; “Interstate Commerce Worker” Exception to the FAA
On March 28th, the Supreme Court heard oral argument in Southwest Airlines Co. v. Saxon, Dkt. 21-309, opinion below, 993 F. 3d 492 (7th Cir. 2021), which explores the scope of the Federal Arbitration Act’s exception for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” Southwest specifically addresses the question of whether an airline’s ramp supervisor, who occasionally handled interstate luggage loading onto or off a flight, falls within the exception, thus denying a U.S. District Court the authority to compel arbitration of her dispute under the FAA. In Rizvanovic v. United Parcel Service, Inc., 2022 U.S. District LEXIS 73569 (E.D. Cal. April 21, 2022), Magistrate Judge Oberto considers whether she should stay an action by a UPS “last mile” delivery driver pending SCOTUS’s decision. The court first holds that, while Rizvanovic has markedly different job from that involved in Southwest, that decision will be relevant to UPS’s motion to compel arbitration. “The Supreme Court is likely to provide guidance on the proper interpretation of the transportation worker exemption of the FAA and clarify whether the exemption encompasses the class of workers who do not physically cross state lines in the course of their employment.” Finding that the delay will not damage the plaintiff and that awaiting the SCOTUS’s decision will potentially preserve judicial resources, the court stays the proceedings. In doing so, Magistrate Judge Oberto joins six other courts, cited in her opinion, which have stayed cases which raise the exemption issue. In doing so, she specifically recognizes that the Supreme Court will issue its Southwest decision “within a reasonable period.”
Calculation of Time to File an Application to Modify or Vacate an Award under the FAA; Service of Petition; Attorneys’ Fees under the ADEA
Section 12 of the Federal Arbitration Act sets forth both the time frame for challenging an arbitration award and the method for serving notice of such a challenge. “Notice 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. 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.” Gonzalez v. Mayhill Behavioral Health, LLC, 2022 U.S. Dist. LEXIS 73272 (E.D. Tex. April 21, 2022)(Mazzant, J.), addresses both issues.
On March 29, 2021, an arbitrator issued a “Final Arbitration Award” in the parties’ dispute. Although the arbitrator found that Mayhill violated the ADEA, he or she did not award either damages or attorneys’ fees. Gonzalez requested reconsideration, but, on May 3, 2021, the arbitrator denied the request. On August 3, 2021, Gonzalez served Mayhill with her motion to modify the award by email.
Judge Mazzant first addresses whether service was proper. The FAA requires that the movant serve such a notice “as prescribed by law for service of a notice of motion in an action” in the court to which the motion is brought. Federal Rule Civ. P. 5 allows electronic service only if consent thereto was “expressly given in writing.” Here, the court finds, there was no such consent. Thus, it holds that “service failed to comply with the FAA’s procedural service requirements.”
The court also holds that the motion was untimely. FAA Section 12 requires service of notice of the motion within three months of the date when the award was “filed or delivered.” (The court cites case law to the effect that the timing is governed by the latter of those two dates). Attacking the question in parts, the court first holds that the relevant date is that of the original award, not the date of the denial of the request for reconsideration. Both the American Arbitration Association’s rules and the FAA set short time frames for modifying awards. “The purpose of these expedited timelines would be thwarted ‘if the limitations period. . . were tolled every time a losing party filed the functional equivalent of a motion for reconsideration.’” (Internal citations omitted).
The court, then, looks to Fed. R. Civ. P. 6 to compute a three-month period. Citing to case law, the court treats each month as if it were a “standard” thirty-day month. As the record was bare as to the date on which the award was filed or mailed, Judge Mazzant starts the clock on April 9th, the date on which Gonzalez sought reconsideration of the award; the arbitrator’s decision must have been mailed before that date, the court opines, or Gonzalez would not have known thereof so as to file her motion. Using a consistent thirty-day calculation, the first month ran from April 10th (Rule 6(a) excludes the date of the event that “triggers the period) to May 9th; the second, from May 10th to June 9th; and the third from June 10th to July 9th. Since Gonzalez did not attempt service until August 3rd, the motion to vacate was untimely. The court’s use of a “standard” thirty-day month, as opposed to calendar months, made no difference in this case, since the court found that the application was untimely by almost a month. But, what if the notice had been served on July 10th, i.e., on the same calendar day as the delivery of the award, but exactly three months later? Is Judge Mazzant right that it would still be untimely?
As an alternative basis for dismissing the petition, the court holds that Gonzalez’s request to modify fails on the merits. The Age Discrimination in Employment Act, on which Gonzalez based her claim, mandates an award of attorneys’ fees to a “prevailing party.” Since the arbitrator did not award even nominal damages of $1.00, “Gonzalez’s victory carries no real relief other than moral satisfaction; but ‘”the moral satisfaction [that] results from any favorable statement of law” cannot bestow prevailing party status,’” quoting Farrar v. Hobby, 506 U.S. 103, 112-13 (1992)(Brackets in opinion). Further, even if the arbitrator erred in not awarding fees, his or her mistake does not constitute a decision to “ignore or pay not attention to. . . well defined, explicit, and clearly applicable” principles of law. Thus, any such error fails to rise to the level under which the “manifest disregard” standard requires vacatur.
Another party has filed a petition for cert. raising the question argued on March 21st in Morgan v. Sundance, Inc., Dkt. No. 21-328. Corliss v. Crossroads Financing, LLC., Dkt. 21-1359, also, raises the question of whether a party opposing arbitration must demonstrate prejudice to establish that the moving party waived the right to compel. The opinion below is unpublished, but is available, along with the petition, at the Scotus blog, Scotusblog.com.
Hopefully, the courts are little more energetic this week. SCOTUS has not calendared any dates for the release of opinions, but the Justices are set to conference this Friday, so perhaps we’ll get something next week.
See you Friday.
David A. Reif, FCIArb