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Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2869

___________

Patrick T. Manion, Jr., *

*

 Appellant, *

*

v. *

*

Stephen E. Nagin; Herzfeld & Rubin; *

Herzfeld & Rubin, P.C.; *

Nagin Gallop Figueredo, P.A., *

*

 Defendants *

*

Boat Dealers’ Alliance, Inc., *

*

 Appellee. *

Appeals from the United States

District Court for the

District of Minnesota.

___________

No. 03-2870

___________

Patrick T. Manion, Jr.; Nancy Manion, *

*

 Appellants, *

*

v. *

*

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Alex Stirling; Beaver Park Marina, *

Inc.; William G. Schaeffer; Boats, Inc.; *

Brian Olson; Donald C. Mackenzie; *

Bruce Marine; Bruce Crowder; Tom *

Crowder; Marineone Corp.; Tony *

Lunpkin; Cope Auto & Marine, Inc.; *

Kenneth Cope; Counce Marine, Inc.; *

Tandy Counce; Crocker’s Marine, *

Inc.; Crocker & Co., L.L.C.; *

Morehead Marine, Inc.; Newland Kay *

Crocker; Terry G. Wilder; Custom *

Fiberglass Manufacturers, Inc.; Frank *

Franklin; “Just Add Water” Boats, Inc.; *

Tim Meyer; Killinger Marine Center, *

Inc.; Douglass Killinger; Norris *

Marine, LTD.; Tom Stidham; Phil Dill *

Boats, Inc.; Phil Dill, Jr.; Port Harbor *

Marine, Inc.; Robert Soucy; Russo’s *

Marine Mart, Inc.; Lawrence J. Russo, *

Sr.; Summerville Marine, Inc.; *

Cleveland Wilson; Texas Marine & *

Brokerage, Inc.; Texas Marine of *

Houston, Inc.; Texas Marine of Clear *

Lake, Inc.; Michael Hebert, *

*

 Appellees. *

___________

Submitted: October 18, 2004

Filed: December 16, 2004

___________

Before MURPHY, HEANEY, and BEAM, Circuit Judges.

___________

HEANEY, Circuit Judge.

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The Honorable Ann D. Montgomery, United States District Judge for the

District of Minnesota.

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In this consolidated appeal, Patrick T. Manion, Jr., challenges the district

court’s1

 order confirming an arbitration award in favor of the Boat Dealers’ Alliance,

Inc. (BDA), and Patrick and Nancy Manion contest the district court’s order

dismissing their claims against individual members of BDA (the Members). We

affirm.

BACKGROUND

Patrick Manion worked for many years in the pleasure boat industry. In 1995,

he formed BDA, a cooperative of independent retail marine dealers, for the purpose

of obtaining better product pricing by leveraging the group’s buying power. BDA

was incorporated in Florida, and Manion executed a long-term employment

agreement which named him as BDA’s Executive Director. The agreement required

Manion and BDA to arbitrate any dispute that arose between them. Manion’s wife,

Nancy Manion, also worked for BDA as an at-will employee.

BDA was initially satisfied with Manion’s performance, but by 1999, BDA was

in dire financial straits. At an emergency shareholders meeting held on February 13,

1999, Manion was terminated. Manion sued BDA, contending that his termination

was improper and that BDA had wrongfully converted ninety shares of preferred

stock in BDA that Manion owned. Manion sought an injunction requiring BDA to

continue compensating him under the terms of his employment agreement, and

declaratory relief related to the interpretation of that agreement. The district court

ordered Manion to arbitrate his claims against BDA, denied his claims for declaratory

and injunctive relief, and stayed the remainder of the proceedings. Manion appealed,

and this court affirmed the order denying injunctive relief, and dismissed the

remainder of his appeal due to a lack of jurisdiction. See Manion v. Nagin, 255 F.3d

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Patrick Manion also sued Stephen E. Nagin, BDA’s general counsel, and his

various law firms, asserting a number of claims related to Manion’s involvement with

BDA. See Manion v. Nagin, Nos. 04-1579 & 04-1705. These companion cases are

being considered separately by this panel.

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535 (8th Cir. 2001). Manion also sued the Members, alleging tortious interference

with contract; conversion; securities fraud; breach of fiduciary duty; unjust

enrichment; tortious interference with prospective business relationships; and

conspiracy.2

 Nancy Manion, who was also terminated, sued the individual members

for tortious interference with an employment at-will relationship; tortious interference

with prospective business relationships; and conspiracy. 

Manion and BDA then began the arbitration process, which, according to the

arbitrator, “continued over many months with a full range of discovery proceedings

and motion practice comparable to complex litigation in United States District

Court.” (Appellee’s App. at 70.) The proceedings included seven days of testimonial

hearings, held from May 29 to June 7, 2002, and the admittance of 191 marked

exhibits. On June 11, 2002, the arbitrator sent counsel for Manion and BDA a letter

confirming their agreement that final submissions would be due at a later date, and

that “[f]urther proceedings respecting costs, disbursements and attorney fees award

will be needed after prevailing party is determined.” (Id. at 148.)

On November 12, 2002, the arbitrator issued a thirty-one page decision entitled

“Findings of Fact, Conclusions of Law and Interim Arbitration Award” (Interim

Award). The arbitrator found that Manion’s employment contract allowed BDA to

terminate him for operating in bad faith against BDA’s interest, or for grossly

negligent conduct which substantially impaired the continued viability of BDA. He

further found Manion to have demonstrated bad faith in at least three instances: 1) by

failing to deduct BDA’s operating expenses before making dividend payments to

BDA’s members; 2) by failing to deduct operating expenses before calculating his

own compensation; and 3) by withholding financial information that would have

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The arbitrator also found that Manion was grossly negligent, but not in a

manner which affected the continued viability of BDA.

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alerted BDA to his bad faith.3

 Because of Manion’s bad faith conduct, the arbitrator

concluded that BDA was legally justified in terminating Manion’s employment

contract. The arbitrator found that Manion remained the rightful owner of his ninety

shares of preferred stock. Since Manion maintained “legal beneficial and

unencumbered title to 90 shares of BDA preferred stock,” (id. at 92), he had no valid

claim for conversion of that stock. The arbitrator invited Manion and BDA to submit

written position papers concerning the amount and terms of payment for any preferred

stock dividends and unpaid salary owed to Manion. The arbitrator further allowed

the parties to submit position papers on whether either was the substantially

prevailing party and thus entitled to attorneys fees pursuant to Manion’s employment

contract. The position papers were “due by simultaneous submission to the Arbitrator

and [the American Arbitration Association] 30 days subsequent to receipt of this

Interim Award.” (Id. at 94.)

BDA filed its submissions in a timely fashion. Manion did not file a timely

submission with the arbitrator, but rather sent a letter to the American Arbitration

Association (AAA) raising objections to the Interim Award. On January 7, 2003, a

hearing was held during which Manion explained that he never submitted a position

paper to the arbitrator because he was forbidden from doing so as a result of a letter

from the AAA instructing the parties not to have any further direct communication

with the arbitrator. Manion’s counsel then engaged the arbitrator in a discussion

pertaining to which rules of procedure governed the arbitration proceeding.

Thereafter, Manion sought to vacate the Interim Award, contending that it was

invalid because the arbitrator did not use the rules of procedure contemplated by the

parties. The district court denied the motion, and on February 21, 2003, the arbitrator

issued a document entitled “Final Award.” The Final Award incorporated the Interim

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Award’s findings of fact and conclusions of law. As to the remaining outstanding

issues, the arbitrator found that Manion was owed $41,181 in past due wages, and

$12,670 in dividends. He further found that Manion’s damages were offset by

monies he overpaid himself for wages and dividends before he was terminated, such

that Manion’s overpayments exceeded his damages by $28,763. Thus, Manion was

entitled to no further payment from BDA, and BDA was entitled to a credit of

$28,763 against any future dividend payments to Manion. Lastly, because BDA

prevailed on the wrongful termination issue, the arbitrator awarded BDA attorneys

fees and costs in the amount of $223,770.50.

BDA moved to confirm the arbitration award in district court, and Manion

moved to vacate it. The Members moved to dismiss the Manions’ claims against

them for failure to state a claim, or, in the alternative, for summary judgment. The

district court heard argument on the motions on May 9, 2003. At the hearing,

Manion argued that the arbitration proceedings were not held under the rules

contemplated by the parties and thus should be vacated. He did not, however,

identify any evidence or argument that he was precluded from presenting to the

arbitrator. Finding no error sufficient to justify vacating the arbitration award, the

district court confirmed the award. As to the Manions’ claims against the Members,

the court found that each substantive claim was collaterally estopped due to the

arbitrator’s conclusions about the propriety of BDA’s termination of Manion and

Manion’s continued ownership of his preferred stock. The court further found that

the conspiracy claim failed because it was not based on the commission of any

underlying tort. Manion appeals, contending that the district court erred in

confirming the arbitration award; the Manions collectively appeal the dismissal of

their claims against the Members.

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ANALYSIS

We review the district court’s findings of fact supporting its confirmation of

an arbitration award for clear error and its legal conclusions de novo. Stark v.

Standberg, Phoenix, & von Gontard, P.C., 381 F.3d 793, 798 (8th Cir. 2004). Our

review of the underlying arbitration award, though, is “very limited.” Gas

Aggregation Servs. v. Howard Avista Energy, LLC, 319 F.3d 1060, 1064 (8th Cir.

2003); see also Stark, 381 F.3d at 798 (“When reviewing an arbitral award, courts

accord ‘an extraordinary level of deference’ to the underlying award itself, because

federal courts are not authorized to reconsider the merits of an arbitral award ‘even

though the parties may allege that the award rests on errors of fact or on

misinterpretation of the contract.’” (citations omitted)); Bhd. of Maint. of Way

Employees v. Terminal R.R. Ass’n, 307 F.3d 737, 739 (8th Cir. 2002) (noting “our

scope of review of the arbitration award itself is among the narrowest known to the

law”). If the arbitrator is arguably construing or applying the arbitration contract and

acting within the scope of his authority, we must uphold the award “[e]ven if the

court is convinced that the arbitrator committed serious error.” Gas Aggregation

Servs., 319 F.3d at 1064.

Under the Federal Arbitration Act (FAA), a court may only vacate an

arbitration award:

(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

misbehavior by which the rights of any party have 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.

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On the contrary, the record shows that the arbitration proceedings were

extended and extensive, covering over a week’s time for hearings which were

documented in nearly two thousand pages of transcript.

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9 U.S.C. § 10(a). In addition to the grounds enumerated in the FAA, we have

recognized two “extremely narrow” extra-statutory bases for vacating an arbitration

award where the award is either completely irrational or manifests a disregard for the

law. Hoffman v. Cargill Inc., 236 F.3d 458, 461 (8th Cir. 2001); see also Stark, 381

F.3d at 798. “An arbitration decision may only be said to be irrational where it fails

to draw its essence from the agreement, and an arbitration decision only manifests

disregard for the law where the arbitrators clearly identify the applicable, governing

law and then proceed to ignore it.” Hoffman, 235 F.3d at 461-62.

Having reviewed the voluminous record in this case against the above

analytical backdrop, we find no error in the district court’s confirmation of the

arbitration award. Manion contends that the arbitrator failed to abide by the parties’

choice of the AAA’s Employment Rules to govern the proceedings, and that he

therefore exceeded his powers and rendered a completely irrational decision.

Manion’s counsel admitted at oral argument before this court, however, that the

arbitrator did not prevent him from presenting any of his evidence.4

 Manion suggests

that because the arbitrator found against him on his claim of wrongful termination,

the arbitrator must have ignored the evidence which compelled a contrary conclusion.

Essentially, Manion asks us to reweigh the evidence that was before the arbitrator,

which our prior decisions make clear is not our prerogative. See, e.g., Hoffman, 236

F.3d at 462. The arbitration award reflects a careful consideration of Manion’s

employment contract, what type of conduct would justify his termination, and

whether BDA had proven any instances of that conduct. The arbitrator’s conclusion

that Manion’s termination was justified by at least three instances of malfeasance is

amply supported by evidence submitted to the arbitrator, and we will not disturb it on

appeal.

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Manion further argues that his conversion claim was denied in manifest

disregard of the law and contravened fundamental notions of due process and fair

play. He provides no authority for these assertions, and we have found no record

evidence to support his contentions. On the contrary, the arbitrator’s decision–that

Manion’s conversion claim fails because he is the still the rightful owner of the stocks

claimed to be converted–appears to place him in the same position as if he had

prevailed on his conversion claim.

We find equally unavailing Manion’s complaint that the bifurcated award

procedure employed by the arbitrator should result in vacation of the decision. The

arbitrator’s Interim Award, issued on November 12, 2002, finally determined the

substantive issues of whether Manion was wrongfully terminated and whether his

preferred stock had been converted by BDA. Prior to the issuance of that award, the

parties had agreed “[f]urther proceedings respecting costs, disbursements and attorney

fees award will be needed after prevailing party is determined.” (Appellee’s App. at

148.) The arbitrator did not decide the amount of past due wages and dividends owed

to Manion in his Interim Award, but rather held that decision until the Final Award,

granting the parties an opportunity to submit argument on these issues. Manion now

claims that because he did not specifically agree that any damages issues would be

reserved, the arbitrator acted without authority by not deciding these issues in his

Interim Award.

We find no reversible error here. First, we question whether the arbitrator

deviated from the procedures agreed to by the parties. The record indicates that the

parties agreed the arbitrator would reserve ruling on certain issues ancillary to

substantive liability findings, and that is precisely what happened. Moreover, it is

difficult to discern any prejudice to Manion from the bifurcated award procedure. In

the Interim Award, the arbitrator rejected the substance of both Manion’s wrongful

termination and conversion claims. The only unresolved issues were the amounts

BDA owed for past wages and dividends, and whether either party was entitled to

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The district court held that the Manions’ conspiracy claims failed because they

were not based on any viable underlying tort, rather than due to collateral estoppel.

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costs and attorneys fees as the prevailing party. Each party was given the opportunity

to argue its position on those matters, and each did. Indeed, the arbitrator granted

Manion a time extension so that he could file his submission, casting doubt on any

argument that the three and a half month delay between the Interim Award and Final

Award somehow unduly burdened him. Manion would have us review the details of

his arbitration proceedings employing a level of scrutiny conferred by neither the

FAA nor the Constitution. We decline the invitation, and thus affirm the district

court’s confirmation of the arbitration award.

We next consider whether the district court properly dismissed the Manions’

claims against the Members. The district court held that the claims were precluded

by application of the collateral estoppel doctrine.5

 “A district court’s rulings on

issues of law, including the application of collateral estoppel, are reviewed de novo.”

Banks v. Int’l Union Elec., Elec., Technical, Salaried, & Mech. Workers, 2004 WL

2754689, at *4 (8th Cir. Dec. 3, 2004).

Collateral estoppel is appropriate when: (1) the issue sought to be

precluded is identical to the issue previously decided; (2) the prior

action resulted in a final adjudication on the merits; (3) the party sought

to be estopped was either a party or in privity with a party to the prior

action; and (4) the party sought to be estopped was given a full and fair

opportunity to be heard on the issue in the prior action.

Wellons, Inc. v. T.E. Ibberson Co., 869 F.2d 1166, 1168 (8th Cir. 1989); see

also Mandich v. Watters, 970 F.2d 462, 465 (8th Cir. 1992) (applying Minnesota

law). A final arbitration award has the same preclusive effect as a prior judgment.

U.S. West Fin. Servs., Inc. v. Buhler, Inc., 150 F.3d 929, 932 (8th Cir. 1998).

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Manion contends that the district court erred by applying collateral estoppel

because the arbitration proceedings were “fundamentally unfair.” (Appellant’s Br.

at 57.) As discussed at length above, we disagree.

7

The Manions’ brief contains no independent argument for reversal of Nancy

Manion’s claim for tortious interference with an at-will employment relationship.

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We agree with the district court that each of the Manions’ claims, save the

conspiracy allegations, are collaterally estopped.6

 Tortious interference with contract

requires proof, inter alia, that a contract was breached, Kallok v. Medtronic, Inc., 573

N.W.2d 356, 362 (Minn. 1998), and the arbitrator found that BDA did not breach its

employment contract with Manion. Manion based his conversion and securities fraud

claims on the allegation that BDA now has his preferred stock, but the arbitrator

explicitly found that Manion still holds title to and owns the stock. Manion’s claim

for breach of fiduciary duty is premised on alleged surreptitious conduct of the

Members that resulted in Manion’s wrongful termination and conversion of his stock;

his unjust enrichment theory, also relates to his employment and stock ownership.

As to the Manions’ claim for tortious interference with prospective business

relationships, we cannot ascertain from the complaint what prospective business

relationships are alleged to have been disturbed. Construing the complaint liberally,

Maki v. Allete, Inc., 383 F.3d 740, 742 (8th Cir. 2004), we assume that the Manions

claim the Members wrongfully interfered with their relationships with BDA. Again,

though, the arbitrator found that it was Manion’s conduct that was wrongful, and he

may not revisit that finding here.7

 With no underlying tort supporting the Manions’

conspiracy claim, it fails as well. We thus affirm the dismissal of the Manions’ suit

against the Members.

CONCLUSION

For the reasons stated herein, we affirm the district court’s confirmation of the

arbitration award and dismissal of the Manions’ claims against the Members.

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