Court Opinion

ID: 9377166
Source: CourtListenerOpinion
Date Created: 2023-03-07 01:00:19.94473+00
Date Added: 2024-06-11T17:17:12.498410
License: Public Domain

Case: 22-20286        Document: 00516667178             Page: 1     Date Filed: 03/06/2023

             United States Court of Appeals
                  for the Fifth Circuit
                                                                                United States Court of Appeals
                                                                                         Fifth Circuit

                                                                                       FILED
                                                                                     March 6, 2023
                                       No. 22-20286                                  Lyle W. Cayce
                                                                                          Clerk

   Dream Medical Group, L.L.C.; Joseph Agresti; BIJ
   Motors TX, L.L.C.; BIJ LA, L.L.C.,

                                                                   Plaintiffs—Appellees,

                                            versus

   Old South Trading Company, L.L.C.; Brendan Church,

                                                               Defendants—Appellants.

                     Appeal from the United States District Court
                         for the Southern District of Texas
                               USDC No. 4:22-CV-134

   Before Davis, Haynes, and Graves, Circuit Judges.
   Per Curiam:*
         Old South Trading Company, LLC (“OST”) and Brendan Church
   (collectively, “Old South”) appeal the district court’s confirmation of an
   arbitration award in favor of Dream Medical Group, LLC (“DMG”), Joseph
   Agresti, BIJ Motors TX, LLC (“BIJ TX”), and BIJ LA, LLC (“BIJ LA”)
   (collectively, “Dream”). The underlying arbitration concerned various

         *
             This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-20286     Document: 00516667178          Page: 2   Date Filed: 03/06/2023

                                   No. 22-20286

   transactions that occurred between the parties in 2020 and the contract
   governing their business relationship. On appeal, Old South argues that the
   arbitration award should be vacated under § 10(a)(3) and (4) of the Federal
   Arbitration Act (“FAA”).       Because Old South fails to demonstrate a
   statutory basis for vacatur, we AFFIRM the district court’s confirmation of
   the arbitration award.
                     I.     Factual & Procedural Background
          Church and Agresti, who founded OST and DMG, respectively, first
   met in March 2020. They subsequently began to do business with each other,
   with Old South supplying Dream with personal protective equipment
   (“PPE”), namely face masks, and Dream distributing that PPE.
          Dream sent Old South a proposed Resolution Agreement, which
   provided that any dispute between the parties under the Agreement would
   be resolved via arbitration pursuant to the rules of the American Arbitration
   Association (“AAA”).       Church initially refused to sign the proposed
   Resolution Agreement. After receiving this refusal, Agresti called Church to
   discuss the Resolution Agreement. Church alleges that during this call
   Agresti represented to him that Dream would never enforce the Resolution
   Agreement. Following this call, Church signed the Resolution Agreement on
   behalf of Old South. Agresti subsequently emailed Church to exercise an
   option under the Resolution Agreement to reject part of a previous
   transaction and get a refund. Church agreed to pay only part of that refund.
          Dream then moved for arbitration, arguing that Old South breached
   the Resolution Agreement by failing to deliver certain masks and fully
   provide its refund. Old South counterclaimed for rescission of the Resolution
   Agreement, arguing that it was fraudulently induced to agree to the contract.

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          An arbitration hearing took place. The arbitration panel 1 then issued
   an award in favor of Dream. The Panel determined that (1) the parties
   entered into the Resolution Agreement, and Old South breached the
   Agreement; (2) Old South failed to prove fraudulent inducement by a
   preponderance of the evidence; and (3) Old South failed to establish a right
   to rescission of the Agreement.
          Dream filed an application for confirmation of the arbitration award
   with the district court. Old South moved to vacate the award. The district
   court denied Old South’s motion and granted the application for
   confirmation of the award, dismissing the case with prejudice.
          Old South timely appealed the district court’s final judgment
   confirming the arbitration award.
                                 II.    Standard of Review
          The district court had diversity jurisdiction over this case under 28
   U.S.C. § 1332(a)(1). We in turn have jurisdiction over this appeal pursuant
   to 28 U.S.C. § 1291.
          We review the “district court’s confirmation of an arbitration award
   de novo, using the same standards as the district court.” Wartsila Finland
   OY v. Duke Cap. LLC, 518 F.3d 287, 291 (5th Cir. 2008) (quotation omitted).
   However, “[j]udicial review of an arbitration award is extraordinarily
   narrow,” and we “defer to the arbitrator’s decision when possible.” Antwine
   v. Prudential Bache Sec., Inc., 899 F.2d 410, 413 (5th Cir. 1990). “The burden
   of proof is on the party seeking to vacate the award, and any doubts or
   uncertainties must be resolved in favor of upholding it.” Cooper v. WestEnd
   Cap. Mgmt., L.L.C., 832 F.3d 534, 544 (5th Cir. 2016).

          1
              The panel consisted of three arbitrators.

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           Under the FAA, “a court ‘must’ confirm an arbitration award
   ‘unless’ it is vacated, modified, or corrected ‘as prescribed’ in §§ 10 and 11.”
   Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582 (2008) (quoting 9
   U.S.C. § 9). Accordingly, our review focuses on the text of the FAA, which
   supplies “the only grounds upon which a reviewing court may vacate an
   arbitrative award.” Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d
   469, 472 (5th Cir. 2012) (quotation omitted). In particular, § 10 of the FAA
   describes the limited circumstances under which an arbitration award may be
   vacated. See 9 U.S.C. § 10(a). These limited circumstances do not include
   vacating an arbitration award based upon the merits of the claims that were
   heard by arbitrators. See id.; see also Householder Grp. v. Caughran, 354 F.
   App’x 848, 851 (5th Cir. 2009) (per curiam); Parker v. ETB Mgmt., L.L.C.,
   667 F. App’x 850, 851 (5th Cir. 2016) (per curiam). 2
                                    III.    Discussion
           Old South argues that the arbitration award should be vacated under
   § 10(a)(3) and (4) of the FAA. We consider Old South’s arguments below.
   A.      Old South’s § 10(a)(3) challenge
           Under § 10(a)(3), a district court may vacate an arbitration award
   where arbitrators have committed (1) “misconduct in refusing to postpone
   the hearing, upon sufficient cause shown,” (2) misconduct “in refusing to
   hear evidence pertinent and material to the controversy,” or (3) “any other
   misbehavior by which the rights of any party have been prejudiced.”
           Old South’s § 10(a)(3) argument is that the Panel denied it a fair
   hearing and prejudiced it by not fully considering its fraudulent inducement

           2
             Although Parker and related unpublished opinions cited herein “[are] not
   controlling precedent,” they “may be [cited as] persuasive authority.” Ballard v. Burton,
   444 F.3d 391, 401 n.7 (citing 5th Cir. R. 47.5.4).

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   claim. However, Old South concedes that the Panel did consider its claims.
   In its opinion, the Panel reviewed Church and Agresti’s business
   relationship, including the facts purportedly supporting Old South’s
   fraudulent inducement claim, before determining that the preponderance of
   the evidence did not demonstrate fraudulent inducement.
          Thus, while Old South attempts to invoke § 10(a)(3), its arguments
   functionally invite us to reassess the merits of its fraudulent inducement
   claim and reach a different conclusion than the Panel. That is not something
   we can do: § 10(a)(3) does not allow vacatur of an arbitration award based
   upon our decision regarding the merits of a party’s claims. See 9 U.S.C.
   § 10(a)(3); see also Householder Grp., 354 F. App’x at 851; Parker, 667 F.
   App’x at 851. Accordingly, we conclude that § 10(a)(3) does not support
   vacatur of the arbitration award.
   B.     Old South’s § 10(a)(4) challenge
          Under § 10(a)(4), a district court may vacate an arbitration award
   “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.” To justify vacatur under § 10(a)(4), parties
   “bear[] [the] heavy burden” of demonstrating more than an error, “or even
   a serious error,” on the part of an arbitrator. Oxford Health Plans LLC v.
   Sutter, 569 U.S. 564, 569 (2013) (quotation omitted). A court may only
   overturn an arbitration award on this ground “if the arbitrator act[s] outside
   the scope of his contractually delegated authority—issuing an award that
   simply reflect[s] [his] own notions of [economic] justice rather than
   draw[ing] its essence from the contract.” Id. (alterations in original) (internal
   citation and quotation marks omitted).
          Old South avers that (1) the Resolution Agreement provided that
   disputes between the parties should be resolved in accordance with the

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   AAA’s rules, and (2) the Panel breached an AAA rule by failing to fully
   review Old South’s evidence of, and the applicable law regarding, fraudulent
   inducement—as a result, it contends, § 10(a)(4) justifies vacatur of the
   arbitration award. Like its § 10(a)(3) assertions, Old South’s § 10(a)(4)
   arguments amount to an invitation for us to reassess the merits of the Panel’s
   decision, which does not fall under the limited text of § 10(a)(4) or support
   vacatur. See 9 U.S.C. § 10(a)(4); see also Householder Grp., 354 F. App’x at
   851; Parker, 667 F. App’x at 851. “[D]oubts or uncertainties must be
   resolved in favor of upholding” an arbitration award, Cooper, 832 F.3d at 544,
   and, considering the nature of Old South’s arguments, we conclude that it
   failed to satisfy its “heavy burden” under § 10(a)(4), see Oxford Health Plans
   LLC, 569 U.S. at 569.
           Separately, Old South argues that it didn’t voluntarily consent to
   arbitration because it was fraudulently induced to sign the Resolution
   Agreement, and, as such, vacatur is warranted under § 10(a)(4). However,
   “[e]ven if [a] contract had been induced by fraud, the arbitration clause is
   enforceable unless the plaintiffs were fraudulently induced into agreeing to
   the arbitration clause itself.” Downer v. Siegel, 489 F.3d 623, 627 (5th Cir.
   2007) (emphasis added).            Because Old South’s fraudulent inducement
   argument doesn’t focus on the Resolution Agreement’s arbitration clause,
   this contention fails. See id. at 628. Accordingly, we conclude that none of
   Old South’s § 10(a)(4) arguments justify vacatur. 3

           3
              Old South contends that the Panel’s purported failure to consider evidence
   related to fraudulent inducement was “manifest disregard of the law” that mandates
   vacatur. It does not elaborate on this contention or assert that manifest disregard supports
   its statutory arguments. To the extent Old South submits manifest disregard as an
   independent basis for vacatur, this argument fails given our precedent rejecting “manifest
   disregard of the law as an independent, nonstatutory ground for setting aside an
   [arbitration] award.” Citigroup Glob. Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009);

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                                    IV.      Conclusion
           Based on the foregoing, we AFFIRM the district court’s
   confirmation of the arbitration award.

   see also Jones v. Michaels Stores, Inc., 991 F.3d 614, 615–16 (5th Cir. 2021) (noting that
   Citigroup continues to be good law).

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