Opinion ID: 223647
Heading Depth: 2
Heading Rank: 1

Heading: three phases of arbitration

Text: A summary of the successive phases of arbitration between the parties will put this appeal, involving the third phase, in context. See Hicks v. Bank of Am., N.A. (Hicks I), 218 F. App’x 739 (10th Cir. 2007) (appeal from first phase), and Hicks v. Cadle Co. (Hicks II), 355 F. App’x 186 (10th Cir. 2009) (appeal from second phase). In 2002, Buckeye Retirement Company (Buckeye), alter ego of the Cadle Company (Cadle Co.), 1 purchased a $1 million promissary note held by Bank of America (BOA). While Mr. Hicks was nominally liable, jointly and 1 Buckeye and Cadle Co. were recognized as alter egos by this court in the decisions cited above. References herein to “Cadle defendants” include Buckeye, Buckeye manager William Shaulis, Cadle Co., and Daniel C. Cadle. -2- severally, for the full amount of the initial version of the (twice-renewed) note, in light of a collateral agreement between him and BOA, he was not liable on the renewed $1 million note, and BOA so informed Buckeye. Buckeye nevertheless sued Mr. Hicks on the note in Tennessee federal district court in 2003. The note has an arbitration clause providing that any controversy or claim between or among the parties hereto including but not limited to those arising out of or relating to this instrument, agreement or document or any related instruments, agreements or documents, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act[.] Aplt. App. Vol. I at 8-9. Invoking this clause, Mr. Hicks initiated arbitration in Colorado against BOA for fraud and against Cadle defendants for bringing suit against him in Tennessee in violation of the clause and for tortious collection activities. BOA repurchased the $1 million note from Buckeye, leading to the dismissal of the suit in Tennessee. But the Colorado arbitration against Cadle defendants for their conduct in attempting to collect on the note continued. In the meantime, Buckeye’s manager sent letters to the Tennessee and Colorado Attorneys General suggesting that Mr. Hicks be investigated for bank fraud. This prompted Mr. Hicks to file suit in Colorado against BOA and Cadle defendants, seeking redress for abuse of process, defamation, and intentional infliction of emotional distress relating to the letters as well as for the alleged wrongdoing already under review in the Colorado arbitration proceeding. BOA -3- removed the suit to federal court and then, joined by Cadle defendants and opposed by Mr. Hicks, moved for a stay on the ground that the suit had to proceed by way of arbitration in light of the arbitration clause in the underlying note. After the stay was granted, the arbitrator bifurcated the expanded proceeding before him into a phase one, involving the claims arising out of the Tennessee collection suit, and a phase two, involving the claims arising out of the letters sent to the state attorneys general. The first phase concluded with an award of $400,000 in damages plus fees for Mr. Hicks. The district court confirmed the award, rejecting a challenge to the arbitrator’s authority over Cadle Co., which had not purchased the note or filed the suit to collect on it and argued that it could not be bound by the arbitration provision it contained. We affirmed the district court’s rejection of this challenge for two reasons: “First, there was abundant evidence . . . that Cadle and Buckeye operated as alter-egos.” “Second, and more importantly, Cadle vigorously participated in the arbitration, advancing a counterclaim against Hicks and joining in BOA’s motion to stay pending completion of the arbitration.” Hicks I, 218 F. App’x at 746. As to the second point, we invoked waiver/estoppel principles that are relevant to the instant appeal: Cadle defendants asserted that this action must be arbitrated because the arbitration clause in the note clearly encompassed all of the issues and claims Hicks asserted. Cadle therefore waived its objection to arbitration and is estopped from arguing that the arbitrator lacked personal jurisdiction to enter an award against it. -4- Id. The second phase of arbitration also concluded favorably to Mr. Hicks. The arbitrator allowed him to amend his claims to conform to evidence showing another fourteen defamatory communications regarding bank fraud and perjury, and then awarded him nearly $2 million in compensatory and punitive damages, with interest. The district court confirmed the damages award, rejecting again Cadle defendants’ objections that the arbitrator lacked jurisdiction over them and the tort claims asserted against them. We agreed. Regarding Cadle defendants’ objection that Mr. Cadle could not be subject to the arbitration clause since he was never a party to the note, we held he was “bound by the arbitration clause as agent[] of The Cadle Co. and Buckeye.” Hicks II, 355 F. App’x at 193. And we had this to say in rejecting Cadle defendants’ objection that the arbitration clause “did not provide a basis for arbitration jurisdiction over [them] for the new tort claims” based on conduct directed toward Mr. Hicks “after [he] had been released from liability under the note”: We agree with the district court that the second-phase claims were within the jurisdiction of the arbitrator. The note’s arbitration clause applied to all controversies arising out of and relating to the note. The note was binding on [BOA’s] successors. Defendants’ tortious actions are directly tied to the note. Defendants engaged in a continuous course of wrongful conduct all arising from a note with a broad arbitration clause. Id. (citations omitted). Most importantly for our purposes here, in addition to these direct rejoinders, we also held Cadle defendants were judicially estopped -5- from challenging the arbitrator’s jurisdiction, even citing our prior holding to that effect in Hicks I as law of the case. Id. The third phase of arbitration began while the second was under judicial review. The district court permitted Mr. Hicks to file a supplemental complaint, promptly referred to the arbitrator, alleging tortious conduct by Mr. Cadle similar to prior acts but occurring after the second-phase award. He had sent more letters accusing Mr. Hicks of fraud and perjury, this time to attorneys general for Ohio and California in addition to Tennessee and Colorado, as well as letters to the Comptroller of the Currency and the Internal Revenue Service. In short, he “kept on pursuing his crusade” against Mr. Hicks, Aplt. App. Vol. II at 263 (Arbitration Award for third phase), through “a repetition and expansion of his acts in the [second-phase] arbitration,” id. at 275. As the arbitrator recognized, “the conduct in question [in the third phase] is substantially similar to that in th[e] previous arbitration hearings” and “the core issues that gave rise to the arbitration [in the second and third phases] are the same.” Id. at 260. The arbitrator awarded Mr. Hicks $1.25 million in compensatory damages and $1.9 million in punitive damages against Mr. Cadle.