Opinion ID: 772585
Heading Depth: 2
Heading Rank: 1

Heading: State-Law Claims Against the IAAF

Text: 12 Slaney's first contention on appeal is that the district court erred in dismissing her claims against the IAAF pursuant to Fed.R.Civ.P. 12(b)(1). The district court determined that the IAAF arbitration decision was covered by the New York Convention. As such, the district court could not entertain claims that would undermine or nullify the Tribunal's decision. The court concluded that Slaney's present claims were sufficiently related to the subject matter of the arbitration decision so as to pose a barrier to federal jurisdiction under Rule 12(b)(1), and further held that none of the New York Convention defenses towards enforcement of foreign arbitration awards applied to Slaney's situation. In her present appeal, Slaney challenges the district court's decision dismissing her IAAF claims, arguing that (1) Slaney is not subject to the New York Convention, in that she has never agreed-- in writing or by actions--to arbitrate all disputes with the IAAF; (2) the claims raised in Slaney's complaint are separate and distinct from the matter decided by the IAAF; and (3) she has defenses under the New York Convention that preclude enforcement of the IAAF arbitration award against her. 13 A district court's dismissal of a complaint under Fed. R.Civ.P. 12(b)(1) is a legal determination which we review de novo. See Massey v. Wheeler, 221 F.3d 1030, 1034 (7th Cir. 2000). According to 9 U.S.C. sec. 201, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) shall be enforced in the United States courts. Article II of the Convention speaks to the requirements of states that have signed on to the Convention. Specifically, the section states that [e]ach Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. Furthermore, the article requires that [t]he court of a Contracting State, when seized of an action in a matter in respect to which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. If an award has been rendered, that award must be enforced unless the party against whom enforcement is sought presents evidence that one of the limited defenses enumerated under Article V of the Convention is applicable. For purposes of this appeal, we note that both the United States and Monaco are signatories to the Convention, such that the United States is bound to enforce arbitral awards validly rendered in that country. 14 In analyzing the merits of Slaney's appeal, we proceed in a systematic fashion. First, we must examine the decision rendered by the IAAF arbitration panel and determine the specific findings made by that Tribunal. Second, we shall examine the state-law causes of action that Slaney now brings against the IAAF in her complaint to the district court, and determine whether in fact those claims seek relitigation of an issue determined by the arbitration. If we determine that adjudication of Slaney's present claims would necessitate a reexamination of matters decided by the arbitration decision, we must resolve whether the arbitration decision, which took place on foreign soil, should be recognized by the courts, and thus deprive us of subject-matter jurisdiction over the present claims. Finally, assuming that we are theoretically obligated to recognize the decision of the Tribunal, we must inquire whether any defense to enforcement is applicable.
15 The April 25, 1999 opinion of the IAAF arbitral panel begins by expounding on the reasoning behind its interlocutory opinion. Setting forth the evidentiary procedure, the Tribunal notes that the initial burden of proof rests with the IAAF to show that an athlete has a T/E ratio greater than the 6:1 established limit. If the IAAF can do so, according to the Tribunal, the Federation has provided sufficient evidence for the sample to be deemed positive. At that point, the burden is shifted to the athlete, who must prove by clear and convincing evidence that the elevated T/E ratio was due to pathological or physiological conditions. In making this analysis, the Tribunal drew from the IAAF rules on testing for testosterone. 16 With the evidentiary procedure established, the Tribunal continued to consider whether Slaney had committed a doping offense. The Tribunal noted that the IAAF had established that both of Slaney's specimens had been analyzed as having T/E ratios significantly higher than 6:1. The tribunal also observed that Slaney's longitudinal study revealed a previous T/E ratio high of 3:1; meaning that her present ratio, by the most modest of calculations, was more than three times greater than she had ever previously tested. Thus the burden was shifted to Slaney to produce a valid explanation for the findings. The Tribunal noted that Slaney had produced no evidence, let alone that of a clear and convincing nature, to prove that her elevated ratio was the result of pathological or physiological factors. Since Slaney had withdrawn from the proceedings, and refused to tender her medical records to the Tribunal, the panel was forced to conclude under the burden-shifting procedure it had outlined that Slaney was guilty of a doping offense on June 17, 1996. 17
18 Keeping in mind the orbit of the Tribunal's decision, we now turn to examine Slaney's present state-law causes of action against the IAAF. Slaney raises six such claims: breach of contract, negligence, breach of fiduciary duty of good faith and fair dealing, fraud, constructive fraud, and negligent misrepresentation. Putting aside Slaney's amorphous allegations of misrepresentations, we note that her complaints center around the claim that the IAAF violated its obligations to Slaney by using the T/E ratio as a proxy for doping in women. Thus, she alleges that the Federation failed to properly investigate her urine sample. Though Slaney does not specify how she was damaged by the implementation of the T/E test (for reasons that will become pellucid during our discussion of Slaney's state-law claims against the USOC), the answer is apparent. The implementation by the IAAF of a burden-shifting approach to proving ingestion of testosterone damaged Slaney in that, as a result, she was unable to disprove that she had committed the offense--resulting in her suspension. 6 19 We conclude that Slaney's present complaint seeks to address issues decided by the Tribunal. During the course of the IAAF arbitration, Slaney presented two positions: (1) that the IAAF's T/E ratio test for determining ingestion of exogenous testosterone was invalid, and (2) that it could not be proven that Slaney had committed a doping violation. Though Slaney attempts to limit the import of the Tribunal's decision, characterizing that decision as merely a finding that she had a T/E ratio above 6:1, it is incontrovertible that the arbitration panel went further, first upholding the T/E ratio test, and then determining that Slaney had committed a doping offense. As our inquiry above made transparent, Slaney's state-law claims against the IAAF seek deliberation on the identical issues. For example, in order to adjudicate whether Slaney's Fifth Count (negligence against the IAAF) is a valid claim, the court would be required to delve into whether the cause of action makes the prima facie case. That probing would require that the court assess whether the IAAF in fact breached its obligations to Slaney. Slaney claims that the IAAF had a duty to properly test her for drug use. Since Slaney asserts that the IAAF breached this duty by employing the T/E test, the court would de facto be required to determine whether the implementation of that test constituted a breach of the duty to properly test athletes. Of course, the court could not reach that decision without addressing the validity of the test itself. Likewise, any examination of damages would require an assessment of whether Slaney was properly found guilty of a doping offense. Thus, we accept the district court's finding that allowing Slaney's current action would undermine or nullify the Tribunal's decision. See Rudell v. Comprehensive Accounting Corp., 802 F.2d 926, 928 (7th Cir. 1986).
20 Having determined that Slaney's current complaint seeks to relitigate issues previously determined by the arbitration, we now turn to the critical issue of whether we are required to acknowledge the foreign arbitration decision. If we are, then unless Slaney can present a defense to enforcement, we cannot exercise subject-matter jurisdiction over her present claims, as that would require prohibited relitigation of previously decided issues. 21 Slaney's primary contention in this regard is that the arbitration between herself and the IAAF need not be enforced by federal courts in that it did not satisfy the requirements of the New York Convention. First, Slaney points out that there is no agreement in writing between her and the IAAF in which she agreed to submit her claims to arbitration. Since the New York Convention states that [e]ach Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which... may arise between them in respect of a defined legal relationship, the absence of such an agreement would allow relitigation of matters decided in that arbitration. Furthermore, Slaney puts forth that even if the Tribunal's decision is recognized, that does not influence her present case, as she was not a party to the arbitration. The IAAF counters that Slaney, by becoming a member of the USATF, agreed to abide by all IAAF rules. Included within those rules is the requirement that she arbitrate all disputes with the IAAF. If the requirement of an agreement in writing is applicable, the IAAF suggests that Slaney's written agreement with the IAAF satisfies the requirement. Alternatively, the IAAF posits that the agreement in writing requirement of Article II of the New York Convention is immaterial in this instance, as the IAAF is not seeking to force Slaney to arbitrate her claims, but rather arguing that her present claims have already been decided by an arbitration. Additionally, because the IAAF suggests that Slaney participated in the IAAF arbitration, she cannot now raise the procedural defense of lack of an arbitration agreement. 22 Whether Slaney's written agreement to follow the rules of the USATF would satisfy the requirement of an agreement in writing for purposes of enforcing an arbitration agreement with the IAAF is a question we need not resolve. Instead, we direct our inquiry to whether Slaney was a party to the IAAF arbitration, and what results flow from that fact. An examination of Slaney's actions following the IAAF's submission of the matter to the Tribunal leads to only one conclusion: Slaney was a participant in the arbitration. During the arbitration, Slaney's counsel appeared before and presented arguments to the Tribunal. Her counsel called an expert witness to testify on Slaney's behalf, filed a motion to dismiss, and a motion for summary judgment. Furthermore, Slaney's counsel moved for an interlocutory ruling regarding the burden of proof the Tribunal would apply. Given this level of participation, the district court was correct to reject Slaney's contention that she was merely an interested athlete in the proceedings. 23 Assuming that this case had come to the district court and the IAAF had sought to compel Slaney to arbitrate her claims, a determination as to whether there had been a writing might pose a barrier to the IAAF's position. However, that is not the case. Here, an arbitration has already taken place in which, as we have determined, Slaney freely participated. Thus, the fact that Slaney suggests there is no written agreement to arbitrate, as mandated by Article II of the New York Convention is irrelevant. See e.g., Coutinho Caro & Co., U.S.A., Inc. v. Marcus Trading Inc., Nos. 3:95CV2362 AWT, 3:96CV2218 AWT, 3:96CV2219 AWT, 2000 WL 435566 at  n.4 (D. Conn. March 14, 2000) (recognizing a difference between the situation where a party seeks to compel arbitration and a situation in which one attempts to set aside an arbitral award that has already been issued). What is highlighted here is the difference between Article II of the Convention, which dictates when a court should compel parties to an arbitration, and Article V, which lists the narrow circumstances in which an arbitration decision between signatories to the Convention should not be enforced. 24 We see no reason why, even in the absence of a writing, ordinary rules of contract law should not apply. The Second Circuit, in Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogeneration Int'l, Inc., 198 F.3d 88, 96-97 (2d Cir. 1999), cert denied U.S., 121 S.Ct.51, 148 L.Ed.2d 20(2000), noted that non-signatories to an arbitration agreement may nevertheless be bound according to ordinary principles of contract and agency, including estoppel. Our judicial system is not meant to provide a second bite at the apple for those who have sought adjudication of their disputes in other forums and are not content with the resolution they have received. Slaney had the opportunity to show that she had never agreed to arbitrate the dispute when she was notified of the arbitration, but she let that opportunity pass. Slaney could not sit back and allow the arbitration to go forward, and only after it was all done... say: oh by the way, we never agreed to the arbitration clause. That is a tactic that the law of arbitration, with its commitment to speed, will not tolerate. Comprehensive Accounting Corp. v. Rudell, 760 F.2d 138, 140 (7th Cir. 1985). If a party willingly and without reservation allows an issue to be submitted to arbitration, he cannot await the outcome and then later argue that the arbitrator lacked authority to decide the matter. AGCO Corp. v. Anglin, 216 F.3d 589, 593 (7th Cir. 2000). Thus, we find that the Tribunal's decision must be recognized by this court, and unless a defense is present, must bar her present claims.
25 Slaney alternatively suggests that even if we are to determine that she is bound by the arbitration panel's decision, the New York Convention provides exceptions in which a court need not enforce a foreign arbitral decision, and that those defenses to enforcement are applicable to the Tribunal's decision. 26 The first such defense raised by Slaney is that the Tribunal's decision should not be enforced because she was denied the opportunity to present her case. Slaney contends that under the IAAF rules, the IAAF has the burden of proving beyond a reasonable doubt that a doping offense has occurred. Her defense, she puts forth, was that the IAAF could not scientifically prove beyond a reasonable doubt that any prohibited substance was in her urine. Thus, when the Tribunal concluded it was bound by the IAAF's position--that upon a showing that an athlete had a T/E ratio greater than 6:1 the burden shifted to the athlete to show by clear and convincing evidence that the elevated ratio was due to a pathological or physiological condition--the Tribunal in effect denied Slaney a meaningful opportunity to present her case. 27 Article V(1)(b) of the New York Convention states that recognition and enforcement of an award may be refused if the party against whom it is invoked furnishes proof that it was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case. (emphasis added). A court of appeals reviews a district court's decision confirming an arbitration award under ordinary standards: accepting findings of fact that are not clearly erroneous and deciding questions of law de novo. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, (1995); Generica Ltd. v. Pharmaceutical Basics, Inc., 125 F.3d 1123, 1129 (7th Cir. 1997). As we have noted, in order to comport with the requirement that a party to a foreign arbitration be able to present her case, we require that the arbitrator provide a fundamentally fair hearing. See Generica, 125 F.3d at 1130. A fundamentally fair hearing is one that meets the minimal requirements of fairness--adequate notice, a hearing on the evidence, and an impartial decision by the arbitrator. Sunshine Mining Co. v. United Steelworkers, 823 F.2d 1289, 1295 (9th Cir. 1987) (internal citation omitted). Nevertheless, parties that have chosen to remedy their disputes through arbitration rather than litigation should not expect the same procedures they would find in the judicial arena. See Generica, 125 F.3d at 1130. Specifically, concerning evidentiary matters, the Supreme Court has noted that [a]rbitrators are not bound by the rules of evidence. Bernhardt v. Polygraphic Co., 350 U.S. 198, 203-04 n. 4, (1956). The extent of an arbitrator's latitude is such that an arbitrator is not bound to hear all of the evidence tendered by the parties.... [H]e must [merely] give each of the parties to the dispute an adequate opportunity to present its evidence and arguments. Generica, 125 F.3d at 1130 (citing Hoteles Condado Beach v. Union De Tronquistas, 763 F.2d 34, 39 (1st Cir. 1985)). It is when the exclusion of relevant evidence actually deprived a party of a fair hearing that it is appropriate to vacate an arbitral award. See id. 28 In Generica, we surveyed several cases in which an arbitrator's award was not enforced by the courts on the grounds raised now by Slaney. For example, in Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 21 (2d Cir. 1997), the court held that, under the FAA sec. 10(a), an arbitration panel's refusal to continue hearings to allow a witness to testify, the only witness with evidence of fraud not found from other sources, was fundamental unfairness and misconduct sufficient to vacate the award. In Iran Aircraft Indus. v. Avco Corp., 980 F.2d 141, 146 (2d Cir. 1992), a court also vacated an arbitration award, in that instance because the tribunal changed evidentiary rules during the hearing and thus prevented a party from presenting its documentary evidence. See also Hoteles Condado, 763 F.2d at 40.) (vacating award when the arbitrator excluded the only evidence available to refute the claims); Hall v. Eastern Air Lines, Inc., 511 F.2d 663, 664 (5th Cir. 1975) (refusing to enforce an award because the arbitration board refused to give weight to a party's previously untendered alibi defense). Our examination of these cases leads us to conclude that Slaney's allegation has no merit. This defense to enforcement of a foreign arbitration need not apply when a panel employs a burden-shifting test in a fair manner. Slaney was not denied an opportunity to present her evidence. Rather, the arbitrator's decision merely maintained the same standard of proof the IAAF had always been guided by. As such, Slaney's complaint does not truly attack the procedure implemented by the arbitration panel, but rather an underlying evidentiary decision of the panel. Unfortunately for Slaney, as the Supreme Court has noted, arbitrators are not bound by the rules of evidence. Bernhardt, 350 U.S. at 203-04 n.4. Thus, this attempted defense must fail. 29 Slaney's final submission on this issue is that presuming she had committed a doping offense based on a test that is scientifically invalid and discriminatory towards female athletes violated the 'most basic notions of morality and justice.' Slaney further postulates that eliminating the presumption of [her] innocence based upon her elevated T/E ratio also violates... explicit public policy that is well defined and dominant and is ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interests. 30 According to Article V(2)(b) of the New York Convention, [r]ecognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:... [t]he recognition or enforcement of the award would be contrary to the public policy of that country. In Fotocrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir. 1975), the Second Circuit noted that the public policy defense is exceedingly narrow. While Slaney states that the Tribunal's decision meets the stringent requirements of that case and others, in that the Tribunal's decision violated the most basic notions of morality and justice, id., and that enforcement would entail a violation of a paramount legal principle that is ascertained by reference to the laws and legal precedents and from general considerations of supposed public interests, Industrial Risk Insurers v. M.A.N. Gutenhoffnungshutte GmbH, 141 F.3d 1434, 1445 (11th Cir. 1998) (internal quotations omitted), she provides little support for her contention. 31 Reduced to its essence, Slaney contends that the burden-shifting approach adopted by the IAAF violates United States public policy. We disagree. According to the parties, proving the presence of exogenous testosterone in the body by scientific tests is not possible at the present time. Therefore, the IAAF has adopted the rebuttable presumption of ingestion from a high T/E ratio in an athlete's urine, as detailed throughout this opinion. Were the IAAF not to make use of the rebuttable presumption, it would be nearly impossible, absent eyewitness proof, to ever find that an athlete had ingested testosterone. As the IAAF notes, criminal defendants are frequently required to come forward with proof establishing a basis for asserting affirmative defenses. See, e.g., Martin v. Ohio, 480 U.S. 228 (1987); Leland v. Oregon, 343 U.S. 790 (1952). We hope that at some juncture, science will develop a means for detecting exogenous testosterone in athletes, such that an athlete's T/E ratio of 11.6:1 can be discounted if it is based on innocent factors. However, until that point in time, we are confident that requiring an athlete to prove by clear and convincing evidence that her elevated ratio was due to pathological or physiological factors does not invoke a violation of United States public policy as federal case law has required in order for a court to refuse to enforce a foreign arbitral award. 32 Thus, having found that (1) Slaney participated in the IAAF arbitration, (2) her present state-law complaint seeks to relitigate issues decided by the IAAF Tribunal, (3) the New York Convention mandates enforcement of the arbitrator's decision, and (4) there is no defense that should bar enforcement of the arbitration decision, we find that the district court did not err in dismissing Slaney's state-law claims against the IAAF pursuant to Fed.R.Civ. P. 12(b)(1).