Court Opinion

ID: 223647
Source: CourtListenerOpinion
Date Created: 2011-08-19 18:22:32+00
Date Added: 2024-06-11T17:29:00.925186
License: Public Domain

FILED
                                                          United States Court of Appeals
                                                                  Tenth Circuit

                                                                August 19, 2011
                   UNITED STATES COURT OF APPEALS
                                                Elisabeth A. Shumaker
                                                                  Clerk of Court
                           FOR THE TENTH CIRCUIT

    KERRY R. HICKS,

             Plaintiff-Appellee,

    v.                                                  No. 10-1575
                                           (D.C. No. 1:04-CV-02616-ZLW-KLM)
    DANIEL C. CADLE,                                     (D. Colo.)

             Defendant-Appellant,

    and

    THE CADLE COMPANY; BUCKEYE
    RETIREMENT CO., LLC, LTD.;
    WILLIAM E. SHAULIS,

             Defendants.

                           ORDER AND JUDGMENT *

Before HARTZ, Circuit Judge, and HOLLOWAY and PORFILIO, Senior
Circuit Judges.

*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
      Defendant Daniel C. Cadle appeals from a district court order confirming

an arbitration award of $3.15 million, plus prejudgment interest, against him on

plaintiff Kerry R. Hicks’s claims of defamation and intentional infliction of

emotional distress. While couched in various ways, all of Mr. Cadle’s objections

concern whether the dispute was properly referred to arbitration. The district

court rejected Mr. Cadle’s objections for alternative reasons, holding that he was

judicially estopped from challenging the arbitrator’s authority and that the dispute

was in any event properly referred to arbitration. On de novo review, McWilliams

v. Logicon, Inc., 143 F.3d 573, 575 (10th Cir. 1998), we affirm on the basis of

judicial estoppel and hence do not address any issues unrelated to that rationale.

                    I. THREE PHASES OF ARBITRATION

      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.

                            II. JUDICIAL ESTOPPEL

      Mr. Cadle challenged the third-phase award on the same grounds he raised,

unsuccessfully, in opposition to the first two phases, nevertheless insisting that

this time he should prevail. We agree with the district court that Mr. Cadle is

                                            -6-
again judicially estopped from denying that the arbitration clause covers the

claims asserted.

      The district court held Mr. Cadle estopped from disputing the arbitrator’s

authority over the third-phase claims for the same reason he was estopped from

disputing the same point with respect to the substantively similar second-phase

claims referred to arbitration at his own insistence:

      The claims in the [second phase] were compelled to arbitration based
      on judicial estoppel because Defendants had stated to the Court their
      position that the relevant arbitration clause “clearly encompasses all
      issues and claims” asserted in the Amended Complaint. The “issues
      and claims” in the Supplemental Complaint [i.e., the third-phase
      claims] differ only in that they pertain to acts performed three years
      later. . . . Thus, because Defendants, including Cadle, were
      judicially estopped from asserting that the arbitrator lacked
      jurisdiction over the claims in the [second phase], Cadle also is
      judicially estopped from asserting that the arbitrator lacked
      jurisdiction over the claims against him in the Supplemental
      Complaint.

Id. at 360. Unable to gainsay the substantive commonality of the tort claims

involved in the second and third phases of arbitration, Mr. Cadle points to their

one distinguishing feature–chronology–and insists that it makes all the difference

in the applicability of judicial estoppel. He contends that because the referral to

arbitration instigated at his insistence involved only the second-phase claims, the

estoppel consequences of his action must be so limited and cannot be the basis for

holding him to the arbitration of the later-asserted third-phase claims.

                                         -7-
      Mr. Cadle’s view of judicial estoppel, limiting it to specific claims rather

than applying it to the legal position he took in connection with those claims, is

unduly constricted, as revealed by comparison with the Supreme Court’s

controlling estoppel decision in New Hampshire v. Maine, 532 U.S. 742 (2001).

That case involved a dispute between New Hampshire and Maine regarding an

inland river boundary. While it was the first time they had litigated competing

claims over the river, twenty-five years earlier they had litigated rival claims over

lobster-fishing rights in the marine waters off the nearby coast. In the earlier

litigation, New Hampshire took the legal position that a 1740 English decree, as

jointly interpreted by the parties, should control boundary disputes in the area.

The marine boundary was fixed accordingly. But in the litigation over the river

boundary, New Hampshire sought an advantageous ruling by asserting a contrary

view of the 1740 decree. The Supreme Court rejected this gambit on judicial

estoppel grounds. For present purposes, it is most significant that the Court did

so without hesitating over the fact that the specific rights in dispute in the two

cases were different; the material point was that New Hampshire sought a

litigation advantage by taking incompatible legal positions in the cases.

      The Court’s general articulation of the judicial estoppel principle reflects

this same focus on change of legal position:

            Where a party assumes a certain position in a legal proceeding,
      and succeeds in maintaining that position, he may not thereafter,
      simply because his interests have changed, assume a contrary

                                          -8-
      position, especially if it be to the prejudice of the party who has
      acquiesced in the position formerly taken by him. . . . This rule,
      known as judicial estoppel, generally prevents a party from
      prevailing in one phase of a case on an argument and then relying on
      a contradictory argument to prevail in another phase.

Id. at 749 (alteration omitted) (internal quotation marks omitted).

      As we have seen, Mr. Cadle was able to force Mr. Hicks into arbitration on

his tort claims for defamation and intentional infliction of emotional distress by

taking a clear-cut legal position: Mr. Hicks’s tort claims arising from Mr. Cadle’s

accusations of fraud and perjury concerning Mr. Hicks’s liability on the

promissary note trigger the note’s arbitration provision. And in Hicks II we held

Mr. Cadle to that legal position when he tried to argue that the arbitration

provision did not apply. Now, in response to more claims of the same type based

on his continuation of similar tortious conduct, Mr. Cadle again tries to argue that

the arbitration provision should not apply. But this time, he insists, he is not

estopped from taking this self-contradicting position, because these were not the

same specific tort claims he previously succeeded in forcing into arbitration. The

weakness in this argument should be apparent from what we have already said

about the thrust of the New Hampshire decision: the focus of the estoppel

analysis is not on the particular claims at issue (coastal-versus-inland boundaries

in New Hampshire; initial-versus-later tort claims here), but on the litigant’s

tactical about-face in legal position (as to the effect of the 1740 decree in New

Hampshire and the effect of the arbitration provision here).

                                          -9-
      Mr. Cadle has not cited any authority undercutting the guidance we have

drawn from the language and substance of the New Hampshire decision. We

therefore see no reason for questioning the application of judicial estoppel based

on the fact that the tort claims in the third-phase proceedings accrued and were

brought into the litigation after Mr. Cadle had successfully forced the

second-phase claims into arbitration.

      Mr. Cadle also advances a much broader objection to the use of judicial

estoppel here. Indeed, he argues that the principle is unavailable per se in the

arbitration context, because it constitutes a compulsory override of the consent

that is the basic precept of arbitration under the Federal Arbitration Act (FAA),

see generally Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758,

1773-74 (2010). He is unable to cite any authority for this categorical position,

however, and of course it is contrary to our decisions in Hicks I and Hicks II. We

now make explicit what is tacit in those decisions: judicial estoppel here is

premised on Mr. Cadle’s own request for arbitration based on his position

regarding the effect of the arbitration clause, and it would be a perverse

understanding of the concept of consent to hold that a party has not consented to

arbitration that it voluntarily sought. Judicial estoppel does not override consent;

it enforces past consent by preventing tactical after-the-fact retraction. It is worth

noting that in Granite Rock Co. v. International Brotherhood of Teamsters,

130 S. Ct. 2847 (2010), a recent case repeatedly cited by Mr. Cadle, the Court

                                         -10-
considered the merits of an argument for arbitration by “waiver or estoppel”

without any indication that such legal principles were categorically inapposite in

that context, id. at 2863 (rejecting argument on the facts). In the absence of more

compelling argument and/or authority, we will not adopt a broad rule barring

application of estoppel principles to the question of arbitration.

      We therefore agree with the district court that Mr. Cadle is estopped from

challenging the arbitrability of the tort claims asserted herein by Mr. Hicks. 2

      The judgment of the district court is AFFIRMED.

                                                     Entered for the Court

                                                     John C. Porfilio
                                                     Senior Circuit Judge

2
      Because arbitration “necessarily waives jury trial,” Harrington v. Atl.
Sounding Co., 602 F.3d 113, 126 (2d Cir. 2010), cert. denied, 131 S. Ct. 1054
(2011), our conclusion that this case was properly referred to arbitration
undercuts Mr. Cadle’s objection that he was wrongly denied a jury trial–a point
we recognized on his last appeal, see Hicks II, 355 F. App’x at 194 n.3.

                                         -11-