Trademark Remodeling, Inc. v. Rhines

TRADEMARK REMODELING, INC., Plaintiff,

v. GREG RHINESandSHARON RHINES, Defendants.

Case No.: PWG-11-1733

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND Northern Division

Date: August 6, 2012

MEMORANDUM AND ORDER

This Memorandum and Order addresses Plaintiff Trademark Remodeling, Inc.'s Amended Motion to Modify, Vacate, or in the Alternative, Correct an Arbitration Award,¹ and its accompanying memoranda, ECF Nos. 16, 17, and 18; and Defendants Greg and Sharon Rhines's Response in Opposition to Plaintiff's Amended Motion and its accompanying memorandum, ECF Nos. 24 & 25. Plaintiff did not file a reply and the time for doing so has passed. See D. Md. Loc. R. 105.2.a. This Memorandum and Order also addresses Defendants' Motion to Enforce Award of Arbitrator, which was originally filed in state court and is attachedto this Memorandum and Order as Exhibit A,² and the supplemental briefing I permitted the parties to file once I concluded that I would rule on the pending motions from the papers:³ Defendants' Supplemental Memorandum, ECF No. 47-1; Plaintiff's Response to Defendants' Supplemental Memorandum, ECF No. 48; and Defendants' Reply, which is attached as Exhibit B.⁴ Thus, the parties were given a full opportunity to present evidence in support of their arguments. While Plaintiff did elect to file with the Court a limited amount of evidence by way of affidavits and documents,⁵ by and large what Plaintiff submitted was an Amended Motioncomprised of sixty-eight largely conclusory assertions unsupported by specific facts. The affidavit submitted by Plaintiff's former attorney does not affirmatively state that it contains facts of which the affiant had personal knowledge; the affidavit also is replete with argument and legal conclusions. The affidavits submitted by Todd Swanson and Eric Swanson, two of Plaintiff's primary officers, similarly fail to state that the facts referenced are based on the affiants' personal knowledge, and contain abundant argument, speculation, and conjecture. The vast majority of what Plaintiff cited in support of its Motion to Modify, Vacate, or Correct was allegation and argument, and very little was of a helpful factual nature.

I. BACKGROUND

In March 2009, the parties entered into a construction contract. Pl.'s Am. Mot. ¶ 6; Defs.' Supp. Mem. ¶ 1; see Agreement to Contract for Remodeling Services ("Construction Contract"), Pl.'s Compl. Ex. 4, in ECF No. 1-2, at 8-20. The contract provided that any disputes among the parties would be submitted to binding arbitration. See Construction Contract 20. A dispute arose, and the parties proceeded to arbitration. See Pl.'s Am. Mem. in Supp. Vacation 3; see also Defs.' Supp. Mem. 1. On March 29, 2011, an arbitrator awarded $83,408.25 to Defendants. Pl.'s Am. Mem. in Supp. Vacation 3; Defs.' Supp. Mem. 1. In May 2012, Defendants (the Rhines) instituted a state court action to enforce the arbitration award. See Defs.' Motion to Enforce 2. In June 2011, Plaintiff (Trademark) instituted the present case in federal court, seeking to vacate, or in the alternative, modify or correct the arbitration award. See Compl., ECF No. 1. Pursuant to my March 30, 2012 Memorandum and Order, which denied Defendants' Motion to Remand, both the Motion to Enforce, originally filed in state court, and Trademark's Amended Motion to Vacate, Modify, or Correct, originally filed in this Court, will be resolved by this Order. See Mar. 30, 2012 Mem. & Order 18, ECF No. 40.

II. DISCUSSION

In the present motion, Plaintiff requests that the Court vacate, modify, or correct the March 29, 2011 arbitration award made in Defendants' favor. A federal court's review of an arbitration award is "'substantially circumscribed.'" Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 527 (4th Cir. 2007) (quoting Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006)). Indeed, "the scope of judicial review for an arbitrator's decision 'is among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all—the quick resolution of disputes and the avoidance of the expense and delay associated with litigation.'" DataQuick, 492 F.3d at 527 (quoting Apex Plumbing Supply, Inc. v. U.S. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998)); see Remmey v. PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994) ("Opening up arbitral awards to myriad legal challenges would eventually reduce arbitral proceedings to the status of preliminary hearings. Parties would cease to utilize a process that no longer had finality. To avoid this result, courts have resisted temptations to redo arbitral decisions."). Thus, in reviewing arbitration awards, federal courts are "'limited to determine whether the arbitrators did the job they were told to do—not whether they did it well, correctly, or reasonably, but simply whether they did it.'" DataQuick, 492 F.3d at 527 (quoting Remmey, 32 F.3d at 146); see also Remmey, 32 F.3d at 146 ("Courts are not free to overturn an arbitral result because they would have reached a different conclusion [on] the same facts.").

The Federal Arbitration Act, 9 U.S.C. §§ 1-16, narrowly states the grounds on which a court may vacate, modify, or correct an arbitration award. See 9 U.S.C. § 10 (vacation); 9 U.S.C. § 11 (modification or correction). A court may vacate, modify, or correct an arbitration award only when the moving party has established one of the grounds listed in the statute or oneof the limited grounds recognized at common law. See DataQuick, 492 F.3d at 527; Switzer v. Credit Acceptance Corp., No. 5:09cv00075, 2010 WL 424573, at *2 (W.D. Va. Jan. 27, 2010). The moving party must make this showing with specific facts; "bald faced allegations" are not sufficient. See Colonna v. Hanners, No. 08:10-CV-1899-AW, 2011 WL 2175248, at *4 (D. Md. June 1, 2011); see also Consolidated Coal Co. v. Local 1643, United Mine Workers of Am., 48 F.3d 125, 129 (4th Cir. 1995) (stating that a showing of certain grounds must be "'direct, definite, and capable of demonstration rather than remote, uncertain or speculative'" (quoting Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 146 (4th Cir. 1993))). Below, I consider the statutory and common law grounds for vacation and modification/correction, and the parties' corresponding arguments, ruling separately as to each.

A. Vacation

A party seeking to vacate an arbitration award "must sustain the heavy burden of showing one of the grounds specified in the Federal Arbitration Act or one of certain limited common law grounds." DataQuick, 492 F.3d at 527 (citing Patten, 441 F.3d at 234). The Federal Arbitration Act provides four instances where vacation is permitted: (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 misbehaviour by which the rights of any party has 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). Additionally, the Fourth Circuit has noted two common law grounds for vacation: (1) "where an award fails to draw its essence from the contract"; and (2) where "theaward evidences a manifest disregard of the law." DataQuick, 492 F.3d at 527 (citing Patten, 441 F.3d at 234) (internal quotation marks omitted).

1. Corruption, Fraud, or Undue Means

An award may be vacated if it was "procured by corruption, fraud, or undue means." 9 U.S.C. § 10(a)(1). The phrase "undue means" has "generally been interpreted to mean something like fraud or corruption." DataQuick, 492 F.3d at 529; see also Nat'l Cas. Co. v. First State Ins. Grp., 430 F.3d 492, 499 (1st Cir. 2005) ("The best reading of the term 'undue means' . . . is that it describes underhanded or conniving ways of procuring an award that are similar to corruption or fraud but do not precisely constitute either."). To prevail under § 10(a)(1), the moving party must show that "the corruption, fraud, or undue means was 'not discoverable upon the exercise of due diligence prior to the arbitration' or during the arbitration, and that the corruption, fraud, or undue means 'materially related to an issue in the arbitration.'" Belmont Partners, LLC v. Mina Mar Grp., Inc., 741 F. Supp. 2d 743, 749 (W.D. Va. 2010) (quoting MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 858 (4th Cir. 2010)). Additionally, the moving party must establish corruption, fraud, or undue means by clear and convincing evidence. Id. (citing MCI Constructors, 610 F.3d at 858).

Plaintiff alleges that the arbitrator's award should be vacated under § 10(a)(1) for several reasons. First, Plaintiff alleges that Defendants presented at the arbitration hearing "confidential personal accounting information" of Plaintiff's principal, "in violation of professional standards of accounting and in breach of confidentiality." Pl.'s Am. Mot. ¶ 29. This evidence subsequently was "withdrawn by Defendants and/or the arbitrator after submission." Id. ¶ 30. Nonetheless, Plaintiff maintains that the submission of this information "by undue means . . . created an atmospher[e] which tainted" Plaintiff's defense. Id. Defendants do not specificallyrespond to Plaintiff's argument, except to assert that Plaintiff has presented no evidence of actual corruption, fraud, or undue means. See Defs.' Mem. in Opp'n 4; Defs.' Supp. Mem. 6. Plaintiff's argument is without merit. No court "has ever suggested that the term 'undue means' should be interpreted to apply to actions of counsel that [may be] merely legally objectionable," MCI Constructors, 610...