2008 First Quarter Case Law Review (continued)

Although nothing Earth-shattering, there are some other decisions to note in no particular order:

The back story in Goldsmith v. Bagby Elevator Co., Inc., --- F.3d ----, 2008 WL 150585 (C.A.11 (Ala.), is an ugly example of on-going racism. Ultimately, Mr. Goldsmith refusal to sign an arbitration agreement that would have covered his existing charge of racial discrimination pending with the Equal Employment Opportunity Commission was Bagby’s excuse for firing him. In Weeks v. Harden Manufacturing Corp., 291 F.3d 1307 (11th Cir.2002), the court ruled that a refusal to sign an arbitration agreement was not a protected activity that could support a claim of retaliation, but it did not address an employee's refusal to sign an agreement that applied to a pending charge of discrimination. Goldsmith was willing to execute an amended dispute resolution agreement that would not have applied to his pending charge, but Bagby insisted that Goldsmith sign an agreement that applied to the pending charge and fired him immediately after he refused to do so. The court concluded that Bagby was not entitled to a judgment as a matter of law against Goldsmith's claim of retaliation because there was sufficient evidence of a causal relation between the filing of his pending charge and later termination.

In Ansley Marine Const., Inc. v. Swanberg. --- S.E.2d ----, 2008 WL 427778 (Ga.App. 2008), plaintiffs sued for breach of contract, fraud, and breach of fiduciary duty following the plaintiffs' sale of certain assets and equipment to the defendants. The transaction involved two contracts, each of which provided that “any controversy or claim arising out of or relating to this Contract or the breach thereof shall be settled by arbitration.” The trial court granted plaintiffs' motion to submit the controversy to arbitration. Although the plaintiffs sought to preserve the breach of fiduciary duty claim for trial rather than arbitration, the award in their favor provided that it was “in full settlement of all claims submitted to this Arbitration. All claims not expressly granted herein are hereby denied.” Unsatisfied with the award, the plaintiffs later moved to vacate. The trial court denied the plaintiffs' motion and entered judgment on the award. The judgment, consistent with the arbitration award, provided that it was in full settlement of all claims submitted to arbitration and that the claims not expressly granted were denied. The defendants moved to dismiss the complaint with prejudice on the grounds that no issues remained which required a trial. The trial court granted the motion and the Plaintiffs appealed.

The court noted that, as a general rule, arbitration under the Georgia Arbitration Code is limited to “all disputes in which the parties thereto have agreed in writing to arbitrate.” Here, the plaintiffs initially filed a “motion to submit controversy to arbitration” but also maintained that the fiduciary duty claims were not subject to arbitration because the claims were independent of the parties' agreement to arbitrate. The trial court granted the plaintiffs' motion. The plaintiffs also filed a demand for arbitration and submission of issues for dispute resolution with the American Arbitration Association requesting resolution of only the “fraud and contract claim.” At the arbitration hearing, however, the plaintiffs argued for and presented evidence related to the fiduciary duty claims raised by the complaint. Furthermore, in the complaint, the plaintiffs contended, among other things, that the defendants had breached their fiduciary duties to ADS Marine and Marine Equipment. In light of the foregoing, the court concluded that plaintiffs presented evidence touching on all the elements of a breach of fiduciary duty on the part of the defendants. The court also found it important that the plaintiffs represented to the arbitrator that they were pursuing fiduciary duty claims in the arbitration and plaintiffs' counsel agreed that plaintiffs were claiming a breach of fiduciary duty to the extent those claims arose from the sales contracts. The court concluded that the parties at least implicitly, if not expressly, agreed to submit the fiduciary duty claims to arbitration, and that they were denied by the award.

With regards to the motion to vacate the award the court pointed out that unless one of the statutory grounds for vacating an arbitration award applies, the trial court is bound to confirm the award. According to the court, the arbitrator's manifest disregard for the law is not a proper basis for the vacation of an arbitration award as it applies to this case, because that ground is applicable only to “civil actions” filed after July 1, 2003, the effective date of OCGA § 9-9-13(b)(5). Since plaintiff's motion to vacate was filed in a civil action commenced in 2002, the court found that trial court correctly recognized that it could not vacate the award on the basis of plaintiffs' claim of the arbitrator's manifest disregard of the law. Bet they didn’t see that coming.

In Hodges v. MedAssets Net Revenue Systems, LLC. Slip Copy, 2008 WL 476140 (N.D.Ga. 2008), “any dispute” with respect to a stock option bonus provision of an employment agreement was to be referred to an Independent Accounting Firm which “shall within sixty (60) days following its selection, deliver to the Buyer and the Seller a written report determining such disputed exceptions, and its determination will be conclusive and binding upon the parties…” Although the term “arbitration” was not mentioned anywhere in the provision, the court concluded that this was a valid form of final and binding arbitration for purposes of the FAA; however, it also concluded that this was a narrow arbitration clause under which only disputes over the calculations were arbitrable and breach of contract and fiduciary duty claims were not covered.

In STG Secure Trading Group, Inc. v. Solaris Opportunity Fund, LP. Slip Copy, 2008 WL 465516 (C.A.11 2008), the attorney for the co-defendants was forced to withdraw for conflict of interest when one client made a claim against the other just prior to the arbitration hearing. The arbitrators’ decision not to postpone was neither misconduct nor abuse of discretion.

Apparently, it’s a small world in Alabama. In McDonald v. H & S Homes, LLC. --- S.E.2d ----, 2008 WL 614815 (Ga.App. 2008), the arbitrator in this case turned out to be friends with McDonald’s counsel. Apparently, the relationship was not disclosed. Fortunately for McDonald, who won, the court found that the loser’s motion to vacate for reasons of partiality was untimely. The court noted that all the attorneys appeared to be well acquainted with each other and seemed to trade off in both serving as arbitrators and advocates in these cases. For all the critics of mandatory arbitration, please note that the consumer won this one and that any abuse of the process appeared to be on the consumer side rather than the lender/seller.