Opinion
Civil Action No. 02-1593 SECTION "K"(1)
October 15, 2002
ORDER AND REASONS
Before the Court is a Motion to Vacate filed by Plaintiffs on May 23, 2002, pursuant to 9 U.S.C. § 10 of the Federal Arbitration Act. Plaintiffs are thirty former and current employees of Halliburton Company who worked or work at the Alliance Refinery in Plaquemines Parish, Louisiana. Defendant Halliburton Company, ("Halliburton") opposes the motion as untimely as well as it being without substantive merit. The Court finds for the reasons that follow that the Motion to Vacate must be denied.
Andrew Jason, Irvin Ross, Sr., Armand Dinet, II, Rudolph Williams, Charles Sanders, Timothy Bartolomew, Olen Bartholemey, Chuck Demolle, Johnny Frazier, Irwin Bienemy, James Compton, Sidney Bienemy, Jerry Whatley, Clifford Campbell, Manuel Black, Rogers Encalade, Dwight Williams, John Broussard, Sam Johnson, Calvin Favors, Eneos Green, Alton Porche, Laron Williams, Nicholas Dinet, Roy Brown, Larry Lars, Johnny Oliver, Deborah Williams, Edward Johnson, and James Whatley
Factual and Procedural Background
Plaintiffs submitted Demands for Arbitration to the American Arbitration Association, Inc. ("AAA") seeking to resolve various employment discrimination claims arising under Title VII of the Civil Rights Act against their employer, Halliburton Company ("Halliburton"), d/b/a Brown Root. Denise Pilié of Stone, Pigman, Walther, Wittman, Hutchinson, LLP ("Stone Pigman") was selected as arbitrator for these claims.
Plaintiffs made several attempts to remove Pilié as arbitrator. Plaintiffs filed a Motion for Recusal of Pilié with the American Arbitration Association (the "AAA") on August 28, 2000. Pilié was allegedly recused that same day. The AAA later reversed their decision and reinstated Pilié as arbitrator of the matter.
The arbitration hearings were substantially completed by June of 2001, save for one claim. That claim was heard on December 12, 2001 for an incident that occurred in October of 2001.
In September 2001, Phillips Petroleum Company ("Phillips") acquired Tosco and thus the Refinery. On November 2, 2001, Pilié sent the AAA a letter disclosing that (1) she and her firm represented Phillips in the past on an unrelated matter and (2) Pilié billed 2.25 hours to Phillips in 2001 on a matter involving a tank car leak that occurred before 1990. Plaintiffs requested the removal of Pilié due to an alleged conflict of interest, but the AAA denied this motion. Plaintiffs then filed a Motion for Recusal on December 6, 2001 on that same basis which was denied.
On December 22, 2001, plaintiffs again sought removal of Pilié on the basis that Pilié had been selected as arbitrator for another Halliburton matter. The AAA again denied this request. The hearings were declared closed as of December 31, 2001.
On January 4, 2002, the AAA reaffirmed the appointment of Pilié as arbitrator. The AAA stated in its letter that it did not provide notice of objection to Pilié The AAA sent a copy of this letter to Pilié On January 11, 2002, the AAA stated in a letter that due to special circumstances the January 4, 2002 letter was sent to Pilié without enclosures. Plaintiffs sent a letter to the AAA again requesting the removal of the arbitrator before an award was rendered. On January 22, 2002, the AAA denied the motion for recusal of Pilié as Arbitrator.
On January 25, 2002, four of the plaintiffs before the Court in the instant suit filed a lawsuit in Civil District Court for the Parish of Orleans against AAA. The case was removed to the United States District Court for the Eastern District of Louisiana on February 21, 2002. The case was assigned to the Honorable Kurt Englehardt.
On February 25, 2002, Pilié rendered an award rendered an award substantially in favor of Halliburton.
On March 12, 2002, plaintiffs filed a Motion to Remand to Civil District Court which was subsequently amended on March 14, 2002. That motion was continued by AAA, and AAA then filed a Motion to Dismiss on April 2, 2002. All motions were subsequently continued to May 1, 2002. They were then reset again for May 29, 2002, on April 24, 2002.
On May 14, 2002, plaintiffs filed a Motion to Vacate the subject arbitration award to be heard before Judge Englehardt on May 29, 2002. The Motion to Vacate sought to add the rest of the plaintiffs who are before this Court and as a defendant, Halliburton Company. Plaintiffs did not seek leave to amend the Complaint that was before Judge Englehardt. Simultaneously with the filing of the Motion to Vacate, the Motion to Remand was withdrawn by plaintiffs.
On May 21, 2002, Halliburton then made an appearance in that suit, noting that it had not been properly served with process as required under Fed.R.Civ.P. 4, but had received a copy of the Motion by mail on May 16, 2002. It requested the Motion to Vacate be continued to June 26, 2002. The court reset the motion to June 12, 2002.
On May 23, 2002, Judge Englehardt issued Order and Reasons granting defendant AAA's Motion to Dismiss based on arbitral immunity. In so doing, the Court found that the FAA provides "the exclusive remedy for challenging misconduct in the administration of an arbitration award" and that the sole purpose of the plaintiffs' petition for damages against AAA is to challenge the alleged wrongs that affect arbitration awards that presently stand in favor of Halliburton. (Doc. 21 of C.A. No. 02-747). The Court concluded that the dismissal under Rule 12(b)(6) was without leave to amend "because an amendment would be futile in view of the Court's finding of arbitral immunity of the solo defendant AAA." Judgment against the original four plaintiffs was then entered in that initial suit on May 29, 2002.
Also on May 23, 2002, plaintiffs filed the instant lawsuit against Halliburton filing the Complaint and the Motion to Vacate, seeking to vacate the arbitrator's award on the basis of evident partiality which motion in essence is identical to the one filed in the suit against AAA. Plaintiffs sought consolidation, but as the earlier numbered case had been dismissed, no consolidation occurred, and the instant case is now before this Court.
Plaintiffs apparently sought to have Halliburton execute a Waiver of Service in this suit which was apparently received by Halliburton on May 28, 2002. It refused to execute the waiver, and proper service by summons was not allegedly affected until July 8, 2002.
Issues Before the Court With Respect to Plaintiffs' Motion to Vacate
In less than a pellucid manner, Plaintiffs opine that evident partiality as a basis to vacate the arbitral award is demonstrated in numerous ways. First, Plaintiffs maintain that the disclosure of Plaintiffs' seeking her recusal would lead a reasonable person to infer that the arbitrator was biased. Secondly, Pilié had a conflict of interest due to the legal work performed by her and her firm, Stone Pigman, on behalf of Phillips, a client of Halliburton and the present owner of the Refinery. This allegation relies on the continuing nature of the Phillips litigation which may result in additional billable hours for Pilié Plaintiffs claim that there is a tort issue of premises liability between Phillips and the plaintiffs. Plaintiffs also allege that there has been much interaction between Halliburton, Phillips, and the plaintiffs and that "the owner of the facility was also directly involved in the promotion process which gave rise to these allegations." (Plaintiffs' Memorandum at 5, 9-10 and Plaintiffs' Motion for Recusal, December 6, 2001). Finally, Plaintiffs argue that because the arbitrator accepted fees from Halliburton for additional mediations and arbitrations from Halliburton during the two years that this matter was pending and received compensation for her services in those matters, evident partiality is also present. (Plaintiffs' Memorandum at 5, 10).
Halliburton responds to the motion contending that it was not served as required under 9 U.S.C. § 12 and thus is time barred. Moreover it contends that Plaintiffs have failed to meet their burden to establish evident partiality by Pilié.
Analysis
Time Bar
The Motion to Vacate was filed pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The FAA specifies that a motion to vacate "must be served upon the adverse party or his attorney within three months after the award is filed." 9 U.S.C. § 12. "A party to an arbitration award who fails to comply with the statutory precondition of timely service of notice forfeits the right to judicial review of the award." Corey v. New York Stock Exchange, 691 F.2d 1205 (6th Cir. 1982);Picollo v. Dain, Kalman, Quail, Inc., 641 F.2d 598 (8th Cir. 1981).
The Award issued or was filed on February 25, 2002. Halliburton contends that Plaintiffs did not properly serve Halliburton with the Motion to Vacate until July 8, 2002. Apparently Halliburton received a Request for Waiver of Service on May 28, 2002; however, Halliburton did not waive service and service was not affected until July 8, 2002, well after the 3-month period. Thus, Plaintiffs did not meet the statutory requirements under the FAA. Eagle Energy, Inc. v. District 17. United Mine Workers of America, 177 F.R.D. 357, 359 (S.D.W.V. 1998). As noted in the Comments to the 1993 Amendments of Federal Rule of Civil Procedure 4(d):
The provisions in former subdivision (c)(2)(C)(ii) of this rule may have been misleading to some parties. Some plaintiffs, not reading the rule carefully, supposed that receipt by the defendant of the mailed complaint had the effect of both of establishing the jurisdiction of the court over the defendant's person and of tolling the statute of limitations in actions in which service of the summons is required to toll the limitations period. The revised rule is clear that, if the waiver is not returned and filed, the limitations period under such law is not tolled and the action will not otherwise proceed until formal service of process is effected.
Fed.R.Civ.P. 4(d), Comments to 1993 Amendments.
Plaintiff was informed in Halliburton Company's motion to continue hearing date on the Motion to Vacate that Halliburton took the position that plaintiffs were required to serve Halliburton with process under Rule 4. Then, apparently, it attempted to do so seeking a Waiver of Service. Halliburton refused to sign; it was incumbent upon Plaintiffs to then obtain proper service of process. As this action was not accomplished timely, this matter should be dismissed. However, even if there had been proper service, this Motion to Vacate fails on its merits.
Evident Partiality
The Federal Arbitration Act, 9 U.S.C. § 10 (2002), supplies the grounds for vacating an arbitration award. It states that a court may vacate an award upon application of a party "where there was evident partiality or corruption in the arbitrators. . . ." Id. at § 10(a)(2). The burden is on the party seeking to vacate the award to prove that there was evident partiality. ANR Coal Co. v. Cogentrix of North Carolina, Inc., 173 F.3d 493, 500 (4th Cir. 1999).
Courts defer to the decision of the arbitrator in the majority of cases. In Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1220 (5th Cir. 1991), the Fifth Circuit affirmed the District Court's affirmation of the arbitrators' award. The court found that "federal courts will defer to the arbitrators' resolution of the dispute whenever possible." Id. at 1218. The court will sustain an arbitration award even if it does not agree with the decision as long as the decision is rationally inferable from the agreement. Id. The court held that the award was rationally inferable from the contract and confirmed the decision of the District Court. Id. at 1219.
To vacate an arbitration award, the court must find that there is a reasonable impression of partiality by the arbitrator rather than the lesser standard of mere appearance of bias. In Evens Industries, Inc. v. Lexington Ins. Co., 2001 WL 803772, *6 (E.D.La. 2001), Judge Vance denied the plaintiffs motion to vacate an arbitration award due to evident partiality or corruption. The plaintiff claimed that two of the three arbiters failed to disclose their relationship with Lexington, the defendant. Id. at *1. Citing Anderman, the court found that "judicial review of an arbitration award was extremely limited." Id. at *2. The Fifth Circuit will not easily overturn an award for evident partiality.Id. at *3 Instead, it "requires the challenger to prove facts that establish 'a reasonable impression of 'partiality' and holds that this requires more than 'the appearance of impropriety standing alone.'" Id. (citing Bernstein Seawell Kove v. W.E. Bosarge, Jr., 813 F.2d 726, 732 (5th Cir. 1987). The court held that there was a general air of reluctance to set aside arbitration awards. Id. The court found that the fact that one of the arbiters failed to disclose that his law firm represented insurance companies that had the same parent company as the defendant was too indirect to establish evident partiality because the Fifth Circuit has found that the possible appearance of bias is insufficient. Id. at *5. The court also held that the fact that the arbiter had represented Lexington on an unrelated matter as part of a joint defense was also not enough to demonstrate evident partiality especially since the arbiter's firm had recently litigated against Lexington. Id.
Courts have articulated four factors to aid in determining whether there is a reasonable impression of partiality by the arbitrator. In ANR Coal Co. v. Cogentrix of North Carolina, Inc., 173 F.3d 493, 502 (4th Cir. 1999), the Fourth Circuit reversed the Magistrate Judge's vacatur of the arbitration award with instructions to reinstate the award. The court found that the arbitrator's failure to disclose the full extent of his relationship with the defendant did not constitute a basis for vacating the award because the Federal Arbitration Act did not include this in its grounds for vacatur. Id. at 497. The court also held that the arbitrator's failure to disclose did not demonstrate evident partiality.Id. at 500. The court found that the party seeking vacatur has the burden of proof and to meet this burden, he must demonstrate "that a reasonable person would have conclude that an arbitrator was partial to the other party to the arbitration." Id. (citing Consolidated Coal Co. v. Local 1643. UMWA, 48 F.3d 125, 129 (4th Cir. 1995)). The courts cited four factors developed by other courts which are used to determine the nature of the relationship between the arbitrator and the party at issue and its connection to the arbitration at hand. Id. The four factors are: (1) the extent and character of the personal interest, pecuniary or otherwise, of the arbitrator in the proceeding, (2) the directness of the relationship between the arbitrator and the party he is alleged to favor, (3) the connection of that relationship to the arbitration, and (4) the proximity in time between the relationship and the arbitration proceeding. Id see also Consolidated Coal Co. v. Local 1643, UMWA, 48 F.3d 125, 130 (4th Cir. 1995) and Hobet Mining, Inc. v. Int'l Union, UMWA, 877 F. Supp. 1011, 1021 (S.D.W. Va. 1994). After applying the test to the facts of the case, the court found that the arbitrator only had a trivial relationship, even though undisclosed, which did not justify the vacatur of an arbitration award. Id. at 502. The Court will now address the three specific areas upon which Plaintiffs seek to have the award vacated.
Simple knowledge on the part of an arbitrator that recusal has been sought and denied is not sufficient to demonstrate that the arbitrator demonstrated evident partiality. At most it would appear that the arbitrator knew of the request, but not the grounds. Plaintiffs have failed to present sufficient evidence to show that the seeking of Pilieacute;'s recusal created bias on the part of the arbitrator. Indeed, under the Federal system, a motion for recusal is committed to the discretion of the district judge. United States v. Bremers, 195 F.2d 221 (5th Cir. 1999). It is reasonable to assume that a person who is dedicated to the administering of a quasi-judicial procedure would be equally able to deal without prejudice to any party that has made such a motion. Thus, this argument has no merit.
Plaintiffs have not produced evidence that establishes a reasonable impression of evident partiality on behalf of Pilié due to her performance of legal work for Phillips. Pilié admitted in her disclosure letter of November 2, 2001 to working on pleadings, motion, and jury instructions with a trial in which Stone Pigman represented Phillips. This matter is unrelated to the case at bar and took place more than a decade before Phillips owned the Refinery. Phillips is not a party to the present lawsuit. Phillips became a client of Halliburton, for present purposes, when it acquired the Refinery in 2001. Twenty-nine of the thirty arbitration hearings took place before Phillips acquired the Refinery. Although the plaintiffs argue that there is a tort issue of premise liability between Phillips and the plaintiffs, the Court is unaware of any further action on this matter. Pilié in her disclosure letter stated that her involvement in the Phillips matter was minimal, constituting only. 2.25 hours of billable time in 2001, and would not affect her impartiality in the present matter. The plaintiffs have not produced evidence upon which a reasonable person could conclude that Pilié demonstrated evident partiality towards either Plaintiffs or Halliburton due to her relationship with Phillips.
Plaintiffs have not produced evidence that establishes a reasonable impression of evident partiality on behalf of Pilié due to her work as arbitrator for other Halliburton mediations and arbitrations. Arbitrators are not held to the same standard as Article III judges because they are considered to be of the marketplace. Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 150 (1969). Arbitrators, like judges, are able to handle more than one matter for the same party. "But it does mean that arbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial." Id. In the case at bar, the relationship between Pilié and Halliburton is that of an arbitrator and a party to a matter. The plaintiffs presented no evidence that this relationship caused Pilié to be partial towards Halliburton. Pilié's communication with Halliburton about other arbitrations is not sufficient evidence to find for evident partiality since arbitrators will necessarily have contact with parties in the matters in which they are arbitrating. Accordingly,
IT IS ORDERED that the Motion to Vacate is DENIED and judgment shall be entered in favor of Halliburton Company and against Plaintiffs.