Commercial Litigation and Arbitration

Court May Hear Motion to Vacate Award Even If Action was Dismissed without Prejudice when Arbitration Compelled — Rule 60(b) Governs Motion for Reconsideration Filed after More Than 10 (Now 14) Days — 60(b)(6) Inapt if (b)(1), (2) or (3) Triggered

From Owen-Williams v. BB&T Inv. Servs., 2010 U.S. Dist. LEXIS 51046 (D.D.C. May 24, 2010):

By Memorandum Opinion and Order dated July 31, 2006, this Court granted Defendant BB&T Investment Services, Inc.'s ("Defendant" or "BB&T") request to compel arbitration of Plaintiff's breach of contract claims. The parties subsequently proceeded to arbitration, and a final arbitration award was issued in Defendant's favor. Plaintiff, proceeding pro se, now moves the Court to vacate the unfavorable arbitration decision or, alternatively, to reconsider the Court's July 31, 2006 Order compelling arbitration in the first instance. ****

A. Legal Standard for Reconsideration of Final Judgment

Plaintiff first moves for reconsideration of the Court's July 31, 2006 Order granting Defendant's motion to compel arbitration. Courts treat such motions for reconsideration as a "[Fed. R. Civ. P.] 59(e) motion if filed within 10 days of entry of the challenged order and as a Rule 60(b) motion if filed thereafter." [This is now 14 days, as of 12/1/09.] *** In this case, Plaintiff's motion was filed on September 29, 2008, more than two years after the challenged Memorandum Opinion was issued on July 31, 2006. Accordingly, the Court shall treat Plaintiff's motion as seeking relief from a final judgment pursuant to Rule 60(b)***.

The Rule [60(b)] "was intended to preserve 'the delicate balance between the sanctity of final judgments . . . and the incessant command of the court's conscience that justice be done in light of all the facts.'" *** Rule 60(b) "gives the district judge broad latitude to relieve a party from a judgment," ***, but "should be only sparingly used" ***. In addition, the Rule specifies that any motions for relief from a final judgment "must be made within a reasonable time — and for reasons (1) [mistake], (2) [newly-discovered evidence], and (3) [fraud] no more than a year after the entry of the judgment or order or the date of the proceeding." Fed. R. Civ. P. 60(c). ***

"This one-year time limit is 'ironclad,' and cannot be extended by the Court." *** In this case, the challenged final judgment was issued on July 31, 2006, but Plaintiff did not file his Rule 60(b) motion until September 29, 2008 — i.e., more than two years after the entry of the order. As such, Plaintiff's motion for relief under Rule 60(b)(2) and (3) is untimely. ***

Plaintiff's attempt to avoid this outcome by relying on the Rule's catch-all provision in paragraph (b)(6) [“any other reason that justifies relief”], which is not subject to the same one year time bar, is without merit. The Supreme Court "has underscored the stringency of the Rule by holding that the catch-all provision, Rule 60(b)(6), is mutually exclusive with the grounds for relief in the other provisions of Rule 60(b), which include [] newly discovered evidence[] and fraud, [both] of which require that the motion be brought within one year of the judgment from which relief is sought." *** Accordingly, because Plaintiff's motion is properly construed under Rule 60(b)(2) and/or Rule 60(b)(3), the Court may not consider the motion under Rule 60(b)(6) as well. ***

B. Motion to Vacate Arbitration Award

*** Plaintiff argues that the arbitration award should be vacated because (1) it was obtained by fraud and (2) the arbitration panel failed to sufficiently articulate a reason for its finding in favor of Defendant. Defendant opposes the motion on substantive grounds and also raises the issue of the Court's jurisdiction to entertain Plaintiff's motion. ***

1. The Court Has Jurisdiction To Entertain Plaintiff's Motion To Vacate

Defendant first argues that this Court is without jurisdiction to rule on Plaintiff's request to vacate. As Defendant correctly notes, the Court, in its July 31, 2006 Memorandum Opinion and Order, granted Defendant's Motion to Compel Arbitration and dismissed Plaintiff's claims without prejudice. ***. In light of this dismissal, Defendant contends that Plaintiff was required to file a new action to have the arbitration award vacated. Because he instead filed a motion to vacate in the same civil action, Defendant concludes that the Court lacks jurisdiction to entertain the present motion. ***

The FAA itself does not independently confer subject matter jurisdiction on a district court. *** Accordingly, the Court's subject matter jurisdiction must be based on an independent source. In this case, the lawsuit was removed to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. The question now before the Court, then, is whether it has been deprived of its diversity jurisdiction over this case as a result of its previous Order dismissing the action without prejudice. Neither party has directed the Court to any case law from within this Circuit addressing whether a court is deprived of jurisdiction to entertain a motion to vacate an arbitration award where, as here, the motion was filed under a case number previously dismissed without prejudice in favor of arbitration nor is the Court itself aware of any such legal precedent. The issue thus appears to be one of first impression in the D.C. Circuit.

Several courts from outside this jurisdiction, however, have addressed this particular issue, and their decisions are instructive. For example, in Green v. Ameritch Corp., 200 F.3d 967 (6th Cir. 2000), the Sixth Circuit concluded, under circumstances nearly identical to those at issue here, that the district court had jurisdiction to resolve a motion to vacate an arbitration award. The plaintiff in Green filed suit alleging that the defendant had unlawfully discriminated and retaliated against him in violation of several state discrimination statutes.... The suit was originally filed in state court and was subsequently removed to federal district court by the defendant based upon diversity jurisdiction.... Shortly thereafter, the parties entered into an arbitration agreement; the district court therefore dismissed plaintiff's case with prejudice based upon the parties' agreement to arbitrate.... The case then proceeded to arbitration, and an arbitration award was ultimately issued in favor of the defendant.... The plaintiff responded by filing a motion to vacate the arbitration award with the district court, but — as here — did so "under the same case number as the original action." ... The district court nonetheless considered and ruled on the substantive merits of the motion, ultimately issuing an order vacating the arbitration award.... On appeal, the defendant challenged the district court's subject matter jurisdiction, arguing that, "since the district court dismissed the case . . ., pursuant to the parties' agreement to arbitrate, there was 'no open proceeding below' through which [the plaintiff] could challenge the arbitrator's ruling." ... Instead, the defendant urged that the plaintiff should have "institut[ed] a new action under § 10 of the FAA in order to challenge the arbitral award." ... The Sixth Circuit disagreed:

[Defendant] essentially argues that the procedure employed by [plaintiff] to challenge the arbitrator's decision deprived the district court of the subject matter jurisdiction it otherwise would have had. Rather than filing a "new" motion under the FAA, [plaintiff] filed an "appeal" of the arbitrator's decision using the case number of the dismissed case, and naming the same judge. [Defendant] contends that because [plaintiff] proceeded under the old case, he also failed to reestablish diversity jurisdiction. Although the proper procedure for initiating a proceeding under § 10 when there is no prior jurisdictional basis is to file a motion to vacate the award that sets forth the facts establishing jurisdiction, [plaintiff]'s pleading error did not bar the district court's exercise of subject matter jurisdiction. The district court clearly had diversity jurisdiction over the action. . . . In these circumstances, the district court properly exercised subject matter jurisdiction. . . .

***The Second Circuit has similarly held that "a court which orders arbitration retains jurisdiction to determine any subsequent application involving the same agreement to arbitrate, including a motion to confirm an arbitration award." Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698, 705 (2d Cir. 1985) ("the application for an order to arbitrate, up to and including the confirmation award, was all one proceeding, and thus, were not separable controversies"). Relying on this language, at least one other court has, in agreement with the Sixth Circuit, concluded that courts retain jurisdiction to hear a motion to vacate even where the original order compelling arbitration dismissed the plaintiff's claims. See, e.g., Collins v. Horton, Inc., 361 F. Supp. 2d 1085, 1091 (D. Ariz. 2005) ("While it is true that the Court dismissed Plaintiffs' claims in favor of arbitration . . ., and that judgment was deemed entered pursuant to Fed. R. Civ. P. 58(b) . . ., courts have held that once a court obtains jurisdiction in an action and enters an order compelling arbitration, that court retains jurisdiction with respect to subsequent motions to confirm or vacate.").

Defendant has not provided the Court with any legal precedent directly holding to the contrary. First, Defendant cites to Bonar v. Dean Witter Reynolds, Inc., 835 F.2d 1378, 1382 (11th Cir. 1988), for the proposition that proceedings to vacate or confirm an arbitration are instituted by filing a motion in the district court that functions as the initial pleading in a post-arbitration case.... Bonar does not, however, directly address whether the failure to do so deprives a court of subject matter jurisdiction. ***

Second, Defendant relies upon the D.C. Circuit's opinion in LaPrade, Liddle & Robinson, LLP v. Kidder Peabody & Co., Inc., 146 F.3d 899 (D.C. Cir. 1998).... Again, however, that case does not directly address the question now before the Court, and the statements relied upon by Defendant are dicta only and do not necessarily conflict with the decisions outlined above. In LaPrade, the district court stayed the underlying action pending arbitration of the plaintiff's claims pursuant to the parties' arbitration agreement.... During the course of the subsequent arbitration proceedings, the plaintiff filed a separate action in state court seeking a stay of the arbitration hearings; in response, the defendant returned to the district court requesting issuance of a temporary restraining order barring plaintiff's efforts to obtain a stay of the arbitration in state court as a violation of the district court's prior orders.... The district court agreed and issued a preliminary injunction and awarded sanctions against plaintiff.... On appeal, the plaintiff argued that the district court lacked jurisdiction to enter the sanctions order because it had only ordered the case stayed and had not actually ordered the parties to enter arbitration; accordingly, the plaintiff asserted that the district court did not have jurisdiction over the arbitration.... The Circuit Court disagreed, finding that "the district court had jurisdiction to address this situation: it retained jurisdiction over the original suit, and the Arbitration Act did not divest it of jurisdiction." ... While the Court of Appeals emphasized in support of this holding that the district court had stayed, rather than dismissed, the original action, it did not opine whether dismissal of the action would have, in fact, deprived the district court of jurisdiction.... Its statements on this issue are therefore dicta and do not control this action.

Third and finally, Defendant cites to Bull HN Information Systems, Inc. v. Hutson, 5 F. Supp. 2d 68 (D. Mass. 1998).... In that case, the parties proceeded directly to arbitration, and suit was initiated only after the arbitration had been completed when the plaintiff filed a motion to vacate the arbitration award.... The district court subsequently entered a final judgment granting the motion to vacate.... The parties therefore returned to arbitration, and a second arbitration award was eventually issued.... The plaintiff again sought to vacate the newly issued arbitration award, but did so by filing a second motion to vacate in the district court under the same civil action number assigned to its first motion to vacate.... While recognizing that the issue was "not crystal clear," the district court ultimately concluded that it had no jurisdiction to take further action in the case given its previous final judgment vacating the original arbitration award; the district court indicated that the plaintiff's second motion to vacate should instead be filed as a new, separate action.... As is apparent, then, the district court in Bull HN Information Services, Inc., was concerned with a question distinct from that now before the Court — namely, whether it had jurisdiction to maintain a "supervisory role once an arbitration award has been vacated and final judgment has [been] entered." ***

Accordingly, in the absence of any case law directly to the contrary, the Court is persuaded by the logic set forth in Green, Smiga, and Collins, that it has jurisdiction over the pending Motion to Vacate. The parties do not dispute that the Court had original jurisdiction over Plaintiff's lawsuit pursuant to 28 U.S.C. § 1332. Additionally, the parties' arbitration agreement recognizes that judgment on the final arbitration award "may be entered in any court having jurisdiction thereof." ***Moreover, while the Court dismissed Plaintiff's claims, it did so without prejudice.... Given these circumstances, the Court concludes that "[Plaintiff's] pleading error d[oes] not bar the [] [C]ourt's exercise of subject matter jurisdiction." Green, 200 F.3d at 974.

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