Opinion
CIVIL ACTION NO. 00-0723-BH-C.
March 8, 2001.
JUDGMENT
Pursuant to the Order entered this day, it is ORDERED, ADJUDGED AND DECREED that JUDGMENT be and is hereby entered as follows:
1. Lanier's motion to vacate the arbitration award is due to be and is hereby DENIED.
2. Petitioners' petition to confirm the arbitration award (Doc. 1) is due to be and is hereby GRANTED.
3. Lanier is ordered to pay to the petitioners, Michael P. Cannon and James Kelley Penny, the sum of $95,692.81 as provided in the Arbitration Award, plus interest thereon under Ala. Code § 8-8-8 at the rate of 6% per annum from July 25, 2000 to the date of this Order.
4. The request of petitioners Cannon and Penney for reasonable attorneys' fees and expenses incurred in defending Lanier's motion to vacate is due to be and is hereby GRANTED. Petitioners shall submit an appropriate statement of such fees and expenses within ten (10) days of this Order and Lanier shall submit a response thereto within ten (10) days thereafter, at which time the Court will consider the amount of fees and expenses to be awarded. This Judgment will be amended by the Court to add these fees and expenses.
5. This Judgment shall bear interest under Ala. Code § 8-8-10 at the rate of 12% per annum from the day after its entry until such time as Lanier pays the Judgment, together with all applicable interest, in full.
ORDER
This action to confirm an arbitration award was commenced on August 9, 2000. The claimant, Lanier Professional Services, Inc., a wholly-owned subsidiary of Lanier Worldwide, Inc., (collectively "Lanier"), has now filed a motion to vacate the arbitration award and opposition to respondents' petition to confirm the award (Docs. 4 and 5). Upon consideration of each party's arguments and all pertinent portions of the record, the Court concludes that the arbitration award at issue is due to be confirmed. Lanier has failed to establish that the award is improper.
Judicial review of an arbitration award is narrowly limited. Lifecare Int'l, Inc. v. CD Medical, Inc., 68 F.3d 429, 432 (11th Cir. 1995). "Arbitration proceedings are summary in nature . . . and require expeditious and summary hearing, with only restricted inquiry into factual issues." O.R. Securities, Inc. v. Professional Planning Assocs., Inc., 857 F.2d 742, 747-48 (11th Cir. 1988). The party seeking to vacate an arbitration award, in this case Lanier, bears the burden of setting forth from the outset in its moving papers sufficient grounds to vacate the award. Id. In this circuit, a party may challenge an arbitration award without reliance on the statutory grounds set forth in the Federal Arbitration Act (FAA) if the award is (1) arbitrary and capricious; (2) in contravention of public policy; or (3) entered in manifest disregard of the law. Scott v. Prudential Securities, Inc., 141 F.3d 1007, 1017 (11th Cir. 1998), citing, Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456 (11th Cir. 1997) (describing the first two non-statutory grounds and adopting the third).
The Court finds it unnecessary, for reasons which will become apparent, to set forth in any detail the facts of this case. Lanier does not challenge any of the factual findings made by the Arbitrator. The Court will, therefore, adopt those findings as undisputed. The arbitration award at issue resulted from an action by Lanier to enforce non-competition, non-solicitation and confidentiality covenants contained in employment agreements entered into between Lanier and two former employees, Petitioners Michael P. Cannon and James Kelly Penney. The contracts in question arose from the purchase by Lanier of petitioners' former employer, Mobile Legal Copy Service, Inc., d/b/a American Legal Copy Service ("Mobile Legal"). At the time of this purchase, Mobile Legal had a total of 10,000 shares outstanding. Petitioners owned 11% each of these shares and their minority interest in the business, even when combined, did not afford them any practical control over corporate decisions including the negotiations concerning the sale of the business. The central document governing Lanier's acquisition of Mobile Legal was a Stock Purchase Agreement which contained non-competition, non-solicitation and non-confidentiality covenants applicable to all the shareholders of mobile Legal. The "Non-Trust Shareholders," which included the petitioners, were subjected to limitations on competition with Lanier and solicitation of its customers for a period of one year from the date of the sale. At the same time that they signed the Stock Purchase Agreement, petitioners Cannon and Penney executed Employment Agreements containing the restrictive covenants that are the subject of this case. The pertinent terms of the Employment Agreements are set forth in the Arbitration Award and will not be repeated herein. Arbitration Award at 6-9, ¶¶ 18 and 19. Although they were separate documents, the Employment Agreements were also attached to the Stock Purchase Agreement and under the language in the Stock Purchase Agreement, all of the exhibits were "incorporated" into the Stock Purchase Agreement. Cannon and Penney played very limited roles in the negotiations for the sale of Mobile Legal to Lanier and only passively accepted the terms negotiated by the other participants.
Cannon resigned from Lanier in September of 1999. He left to set up his own business, Pro Legal Copt Services, Inc. ("Pro Legal"), which began operating in October of 1999. Pro Legal is based in Pensacola, Florida. Penney left Lanier on May 16, 1999, because he was dissatisfied with his job with Lanier. Initially, he attempted to make his living as a day trader but then began working for Pro Legal in December of 1999. From the time that it began its operation to the date of the Arbitration Award, Pro Legal had handled approximately 27 small-to-medium copying jobs, and one large copying job, for Mobile law firms. Lanier experienced no economic loss as a result of the work performed by Pro Legal for Lanier's Alabama customers as the work would not have been performed by Lanier. Pro Legal did not engage in any advertising or marketing in the Mobile area. Cannon and Penney did not take customer lists when they left Lanier.
The Arbitrator concluded that Cannon and Penney did not violate Section 8(b) of their employment contracts by either "[soliciting] . . . any business from any of the Company's clients," or by "[soliciting] for employment . . . any employee of the Company or its affiliates with whom the Employee had material contact during his employment with the Company." The Arbitrator further concluded that Cannon and Penney did not violate the Nondisclosure Covenant contained in section 9 of the Employment Agreement and have not misappropriated or otherwise misused any Lanier trade secrets. The Arbitrator did conclude that, by performing copying jobs for Mobile law firms, Cannon and Penney did violate the "Agreement Not to Compete" in Section 8(a) of the Employment Contracts but that this non-competition covenant was invalid under Georgia law. The Arbitrator held that strict "employment scrutiny" applied to the subject restrictive covenants contained in the Employment Agreements, even though those Employment Agreements were executed as part of a business sale transaction. The arbitrator rejected Lanier's contention that the "incorporation by reference clause" in the Stock Purchase Agreement automatically converted the Employment Agreements at issue into a stock transaction thereby subjecting the restrictive covenants in the Employment Agreements to a lower level of scrutiny under Georgia law.
In support of the motion to vacate in this case, Lanier asserts the "the Arbitrator acted arbitrarily and capriciously when he redrafted the parties' Stock Purchase Agreement, explicitly reading out . . . the incorporation-by-reference clause." Lanier Brief doc. 5 at 8. However, "an award cannot be vacated as arbitrary and capricious unless no ground for the decision can be inferred from the facts." Brown v. ITT Consumer Financial Corp., 211 F.3d 1217, 1223 (11th Cir. 2000), citing, Raiford v. Merrill Lynch, Pierce, Fenner Smith, 903 F.2d 1410, 1413 (11th Cir. 1990). Lanier does not challenge any of the factual findings made by the Arbitrator. After careful review of the Arbitrator's decision, the Court agrees with the petitioners that Lanier has failed to establish that the Arbitrator's decision is groundless. Lanier has not refuted the Arbitrator's independent ruling that "employment scrutiny" applies regardless of the incorporation by reference clause relied on by Lanier because petitioners did not have bargaining power significantly greater than that of mere employees. See e.g., Russell Daniel Irrigation Co. v. Coram, 516 S.E.2d 804 (Ga.App. 1999); White v. Fletcher/Mayo/Assoc., Inc., 303 S.E.2d 746 (Ga. 1983). The Court further agrees that Lanier has not challenged the Arbitrator's additional finding that Lanier sustained no damage as a result of any conduct by the petitioners.
In the text of its brief, Lanier also asserts that the Arbitrator's decision was "in manifest disregard of the law." Lanier Brief (Doc. 5) at 12. This assertion, however, is essentially predicated on the contention that the Arbitrator applied the incorrect level of scrutiny to the restrictive covenants sought to be enforced by Lanier. Id. at 13. Lanier does not argue that the Arbitrator consciously and deliberately ignored the applicable Georgia law. Rather, Lanier at best asserts that the Arbitrator erroneously interpreted the applicable Georgia cases. Such is insufficient to establish the "manifest disregard" necessary to vacate an award. As the eleventh Circuit made clear in Brown,
Arbitration awards will not be reversed due to an erroneous interpretation of law by the arbitrator. Montes v. Shearson Lehman Bros., Inc., 128 F.3d 1456, 1460 (11th Cir. 1997). "To manifestly disregard the law, one must be conscious of the law and deliberately Ignore it." Id. At 1461
211 F.3d at 1223. The Arbitrator in this case did not deliberately ignore Lanier's "incorporation by reference" argument. Indeed, he applied the "incorporation by reference clause" in correctly finding that:
It [the "incorporation by reference clause"] certainly demonstrates that the two agreements are part of the same transaction, but that was just as true in both Watkins and Arnall:
Although the contract here involved is clearly related to the sale of a business, and in this sense involves only one aspect of a larger transaction, it is nonetheless a contract of employment, and must be construed under the rules applicable to the latter.See, Arbitration Award at 19, Par. 14, citing, Arnall Ins. Agency, Inc. v. Arnall, 196 Ga. App. 414, 418-19, 396 S.E.2d 257, 261 (1990), in turn quoting, Watkins v. Avnet, Inc., 122 Ga. App. 474, 476-66, 177 S.E.2d 582, 584 (1970). The Arbitrator closely considered the "incorporation by reference clause" but properly relied on the clear line of Georgia precedent cited in his award, and reiterated in the petitioner's brief, in determining that "employment scrutiny" nevertheless applied. Nor did the Arbitrator ignore any of Lanier's arguments, albeit he rejected them as unsupported either by the law or the material facts.
For these reasons and the reasons set forth in detail in the petitioners' brief (Doc 8), which is adopted by this Court in its entirety, the Court concludes and it is therefore ORDERED as follows:
1. Lanier's motion to vacate the arbitration award is due to be and is hereby DENIED.
2. Petitioner's petition to confirm the arbitration award (Doc. 1) is due to be and is hereby GRANTED.
3. Lanier is ordered to pay to the petitioners, Michael P, Cannon and James Kelley Penny, the sum of $95,692.81 as provided in the Arbitration Award, plus interest thereon under Ala. Code § 8-8-8 (1975) at the rate of 6% per annum from July 25, 2000, to the date of this Order.
4. The request of petitioners Cannon and Penney for reasonable attorneys' fees and expenses incurred in defending Lanier's motion to vacate is due to be and is hereby GRANTED. Petitioners shall submit an appropriate statement of such fees and expenses within ten (10) days of this Order and Lanier shall submit a response thereto within ten (10) days thereafter, at which time the Court will consider the amount of fees and expenses to be awarded. This Order and the Judgment entered pursuant to same will be amended by the Court to add these fees and expenses to the amount of the Judgment reflecting the Arbitration Award and interest incurred thereon.
5. Judgment shall be entered accordingly in favor of the petitioners.