Court Opinion

ID: 3171533
Source: CourtListenerOpinion
Date Created: 2016-01-22 18:00:25.137599+00
Date Added: 2024-06-11T07:38:49.444524
License: Public Domain

PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT
              _______________

             Nos. 15-1627 and 15-1628
                _______________

 ELNOR WHITEHEAD, as Executrix of the Estate of
        John Cavadus Whitehead, Sr.
                    v.
       THE PULLMAN GROUP, LLC,
                       Appellant in No. 15-1627
                         ___

BARBARA MCFADDEN, as Executrix of the Estate of
             Gene McFadden
                   v.
       THE PULLMAN GROUP, LLC,
                      Appellant in No. 15-1628
            _______________

              On Appeal from the District Court
           for the Eastern District of Pennsylvania
       (Civ. Nos. 2-08-cv-00192 and 2-08-cv-00193)
        District Judge: Honorable Legrome D. Davis
                     _______________

  Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                December 10, 2015
   Before: FUENTES, CHAGARES, and GREENBERG,
                   Circuit Judges

             (Opinion Filed: January 22, 2016)

Armen Manasserian, Esq.
3121 Chadney Drive
California, CA 91206

Felton T. Newell, Esq.
The Newell Law Firm
601 South Figueroa Street, Suite 4050
Los Angeles, CA 90017

Attorneys for Appellants

Sayde J. Ladov, Esq.
Dolchin, Slotkin & Todd, P.C.
50 South 16th Street, Suite 3530
Philadelphia, PA 19102

Attorneys for Appellees
                     _______________

                OPINION OF THE COURT
                    _______________

FUENTES, Circuit Judge:

     Singer-songwriters John Whitehead and Gene
McFadden were “an integral part of the Philadelphia music

                              2
scene in the 1970s.”1 In 2002, appellant David Pullman
approached Whitehead and McFadden about purchasing their
song catalogue.2 The parties signed a contract but never
finalized the sale. Whitehead and McFadden passed away in
2004 and 2006, respectively, and Pullman became embroiled
in a series of disputes with their estates over ownership of the
song catalogue.3 The parties eventually agreed to arbitration.
Pullman, unhappy with the arbitral panel’s ruling, moved in
the District Court to vacate the arbitration award on the
ground that the panel had committed legal errors that made it
impossible for him to present a winning case. The District
Court denied Pullman’s motions, and Pullman now appeals.
Even if we were to agree with Pullman that the arbitrators
misapplied the law—and we do not—legal error alone is not a
sufficient basis to vacate the results of an arbitration.
Accordingly, we will affirm.

                                 I.

       Whitehead, McFadden, and Pullman entered into a
contract in May of 2002.4 The agreement gave Pullman the
exclusive option to purchase Whitehead and McFadden’s
song catalogue following a 180-day period in which Pullman
was to conduct due diligence about the catalogue’s value.5
 1
     Appellees’ Br. at 2 (punctuation modified).
 2
  Pullman acted through his company, The Pullman Group,
LLC. We will refer to appellants collectively as “Pullman.”
 3
     We will refer to appellees collectively as “the Estates.”
 4
     See Appellants’ App. at 67–73 (a copy of the contract).
 5
     Id. at 68 ¶¶ 2–3.

                                 3
Once Pullman had completed his investigation, he had the
right to terminate the transaction after giving written notice to
Whitehead and McFadden.6 In the event that any dispute
arose under the contract, the parties agreed to arbitration in
New York City under the rules of the American Arbitration
Association.7

       Pullman claims that his investigation turned up several
tax liens that diminished the value of the song catalogue.8
Pullman communicated his concerns to Whitehead and
McFadden via telephone, at which point they allegedly told
him that they would get back to him with more information.9
Pullman contends that the two songwriters eventually told
him that they did not want to consummate the transaction,
thereby breaching their agreement.10

       The Estates assert that all of this occurred
unbeknownst to Whitehead and McFadden’s relatives. After
Whitehead and McFadden died, the Estates entered into
separate negotiations to sell the song catalogue to Warner
Chappell Music for $4.4 million.11 Shortly before completion
of the transaction, the Estates received a letter from Pullman
disclosing the existence of the May 2002 agreement. A few

 6
     Id. at 71 ¶ 9.
 7
     Id. ¶ 11.
 8
     J.A. 84 (Arbitration Tr. at 215:18–216:6), 86 (222:12–19).
 9
     Id. at 85 (Arbitration Tr. at 220:4–24).
 10
      Id. at 87 (Arbitration Tr. at 227:15–228:4).
 11
      Id. at 114–15 (Arbitration Tr. at 336:21–337:9).

                                 4
months later, Warner Chappell withdrew its offer to purchase
the song catalogue.12

        Litigation ensued. The Estates, claiming that Pullman
had “torpedoed the deal with Warner Chappell in an effort to
get McFadden and Whitehead to sell their catalogue to him
for less money,” sued Pullman in the Court of Common Pleas
of Philadelphia County.13 Pullman removed the case to the
Eastern District of Pennsylvania on the basis of diversity
jurisdiction. The Estates ultimately sought (i) a declaratory
judgment that Pullman’s contract with Whitehead and
McFadden was void, and (ii) damages for intentional
interference with contractual relations.               Pullman
counterclaimed, seeking his own declaratory judgment and
raising a claim for breach of the May 2002 agreement.14 The
parties ultimately filed stipulations agreeing to send the case
to arbitration.15

      A panel of three arbitrators issued its final award in
September of 2014.16 The panel dismissed the parties’
 12
      Id. at 116–17 (Arbitration Tr. at 344:17–345:6).
 13
      Appellees’ Br. at 5.
 14
    J.A. 7 (containing the District Court’s summary of the
case’s procedural history).
 15
      Appellants’ App. at 75–76 (a copy of the stipulation).
 16
    Id. at 2–11. The arbitrators included the Hon. George C.
Pratt, formerly a judge in the Eastern District of New York
(1976–1982) and on the Second Circuit (1982–1995); the
Hon. Richard D. Rosenbloom, formerly a justice on the New
York State Supreme Court; and James Kobak, Jr., Esq.

                                 5
breach-of-contract and tort claims and dismissed the Estates’
request for a declaratory judgment as moot. While the panel
agreed with Pullman that the May 2002 agreement with
Whitehead and McFadden was a valid contract, it also
concluded that Pullman had failed to introduce evidence
sufficient to prove that he had ever notified Whitehead and
McFadden that he had completed his due diligence.
Consequently, the panel ruled that Pullman’s option to
purchase the song catalogue had lapsed and the May 2002
agreement was no longer enforceable.17

       Pullman then moved to vacate the arbitral award. The
District Court denied the motions, leading to this appeal.18

                              II.

      Pullman’s primary argument is that the arbitral panel,
which conducted its proceedings in accordance with New
York law, erred in its application of that state’s so-called
Dead Man’s Statute.19 Subject to certain exceptions, the

 17
      Id. at 4–5.
 18
     The District Court exercised jurisdiction under
28 U.S.C. § 1332. This Court has jurisdiction over an appeal
from the District Court’s final order under 28 U.S.C. § 1291.
The District Court entered its final order on February 13,
2015, and Pullman timely appealed. See J.A. 6–15 (District
Court order); id. at 2–4 (Pullman’s notice of appeal).
 19
      N.Y. C.P.L.R. 4519. The Rule states:

                               6
Statute “disqualifies parties interested in litigation from
testifying about personal transactions or communications with
deceased or mentally ill persons.”20 Its purpose is “to protect
the estate of the deceased from claims of the living who,
through their own perjury, could make factual assertions
which the decedent could not refute in court.”21 After the
parties submitted briefs addressing whether the Dead
Man’s Statute should apply to the arbitration, the panel ruled
that (i) the Statute would apply, but (ii) rather than exclude
otherwise inadmissible evidence from the hearing, the
arbitrators would simply not “give it any weight” by “filtering

      “Upon the trial of an action or the hearing upon
      the merits of a special proceeding, a party or a
      person interested in the event . . . shall not be
      examined as a witness in his own behalf or
      interest . . . against the executor, administrator
      or survivor of a deceased person . . . concerning
      a personal transaction or communication
      between the witness and the deceased
      person . . . except      where    the    executor,
      administrator, survivor . . . or person so
      deriving title or interest is examined in his own
      behalf . . . concerning the same transaction or
      communication.”
 20
   Poslock v. Teachers’ Ret. Bd. of Teachers’ Ret. Sys., 666
N.E.2d 528, 530 (N.Y. 1996).
 21
   Id. (quoting In re Wood’s Estate, 418 N.E.2d 365, 366–67
(N.Y. 1981)).

                              7
out the evidence in our own minds.”22

        By causing the arbitrators to discount any testimony
about oral communications between Pullman and his
contractual counterparties, these rulings made it very difficult
for Pullman to present a winning case. Because the panel
concluded that the import of the May 2002 agreement hinged
on whether Pullman had notified Whitehead and McFadden
that he had completed his due diligence, Pullman asserts that
the only way he could have succeeded in the arbitration was
by producing evidence that he had notified Whitehead and
McFadden in writing about the results of his investigation.
Pullman claims not to have done so for the entirely
understandable reason that he did not anticipate that
Whitehead and McFadden would die. Pullman now argues
that the arbitrators’ application of the Dead Man’s Statute was
erroneous because it effectively made it impossible for him to
prove his case, thereby depriving him of a fair hearing.

                                III.

        The District Court concluded that even if the arbitral
panel erred in its application of the Dead Man’s Statute, that
error was not sufficient to vacate the results of the parties’
arbitration. We agree.23

 22
      J.A. 31 (Arbitration Tr. at 4:3–12).
 23
    When reviewing a district court’s denial of a motion to
vacate an arbitration award, we review its legal conclusions
de novo and its factual findings for clear error. Sutter v.
Oxford Health Plans LLC, 675 F.3d 215, 219 (3d Cir. 2012),
as amended (Apr. 4, 2012), aff’d, 133 S. Ct. 2064 (2013).

                                 8
        We begin with the Federal Arbitration Act, which
specifies four circumstances under which a district court can
vacate an arbitral award.24 The Supreme Court has held that
these are the “exclusive grounds” for moving to vacate an
award in a district court.25 One of the four grounds is
“misconduct . . . in refusing to hear evidence pertinent and
material to the controversy.”26 Pullman asserts that the
arbitral panel erred under this subsection by refusing to
consider testimony about Pullman’s oral communications
with Whitehead and McFadden.

       Contrary to Pullman’s argument, we have long held
that for an error to justify vacating an arbitration award, it
must be “not simply an error of law, but [one] which so
affects the rights of a party that it may be said that he was
deprived of a fair hearing.”27 We have also spoken of
procedural irregularities so prejudicial that they result in
“fundamental unfairness.”28 Here, we discern no unfairness
at all. The arbitral panel reasonably chose not to consider
potentially self-serving testimony about communications with
persons who are no longer able to present their side of the

 24
      9 U.S.C. § 10(a).
 25
   Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584
(2008).
 26
      9 U.S.C. § 10(a)(3).
 27
   Newark Stereotypers’ Union No. 18 v. Newark Morning
Ledger Co., 397 F.2d 594, 599 (3d Cir. 1968).
 28
    Teamsters Local 312 v. Matlack, Inc., 118 F.3d 985, 995
(3d Cir. 1997).

                              9
story.

        Nor are we persuaded by Pullman’s argument that the
only way he could have succeeded before the arbitrators was
to have documented his communications with Whitehead and
McFadden in anticipation of the fact that they might die.
Pullman makes this assertion as though it illuminates some
manifest injustice. To the contrary, the May 2002 agreement
specified that any dispute about its meaning was to be
arbitrated in New York. It was entirely foreseeable—even in
2002—that an arbitral panel comprised of New York jurists
might apply that state’s evidentiary rules, including the Dead
Man’s Statute.

       Pullman also argues that, even if the arbitral panel’s
decision to apply the Statute was reasonable, the Estates
“opened the door” to testimony about oral communications
with Whitehead and McFadden by introducing evidence on
the same subject. This argument is unavailing. Pullman is of
course correct that a party generally cannot use an evidentiary
rule as both sword and shield. Even so, that principle is
meant to prevent one party from gaining an unfair advantage;
it has no application to the present circumstances, in which
the arbitral panel assured the parties that it would “filter out”
any inadmissible testimony. The purpose of the panel’s
ruling was to make the parties’ task easier by permitting them
to present their respective cases without having to worry

                               10
about triggering any evidentiary tripwires.29 In view of the
arbitrators’ promise to “filter out” any problematic testimony,
it is fair to say that the panel reached the same result as it
would have if there had been no testimony whatsoever about
conversations with Whitehead and McFadden. There was no
“door” for the Estates to open at all.

                                  IV.

       Lastly, Pullman contends that the arbitrators’ actions
amounted to a “manifest disregard of the law.”30 Whether
this standard survived the Supreme Court’s conclusion in
Mattel that the Federal Arbitration Act provides the
“exclusive grounds” for vacating an arbitral award is an open
question.31 A circuit split has since developed, and this Court
has not yet weighed-in.32 We decline the opportunity to do so

 29
    See J.A. 85 (Arbitration Tr. at 218:14–25) (in which the
chairman of the panel clarifies that the panel is “not
preventing anyone from talking about” evidence otherwise
inadmissible under the Dead Man’s Statute because it is
“almost impossible to try to filter out [such evidence] by
question and answer”).
 30
      Appellants’ Br. at 21–23.
 31
    See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559
U.S. 662, 672 n.3 (2010) (declining to resolve the issue).
 32
    See, e.g., Bellantuono v. ICAP Sec. USA, LLC, 557
F. App’x 168, 173–74 & n.3 (3d Cir. 2014) (explaining the
current state of the law); Paul Green Sch. of Rock Music
Franchising, LLC v. Smith, 389 F. App’x 172, 176–77
(3d Cir. 2010) (same).

                                  11
now.

        Indeed, even if we were to consider Pullman’s
arguments under the rubric of “manifest disregard of the
law,” we still would not arrive where Pullman wants us to go.
The manifest disregard standard requires more than legal
error. Rather, the arbitrators’ decision “must fly in the face of
clearly established legal precedent,”33 such as where an
arbitrator “appreciates the existence of a clearly governing
legal principle but decides to ignore or pay no attention to
it.”34    We have therefore described this standard as
“extremely deferential.”35 In these circumstances, where the
arbitrators were fully cognizant of the Dead Man’s Statute,
permitted the parties to brief the issue, and then applied the
Statute in a way designed to promote efficiency and fairness
in the arbitral proceedings, we see no legal error at all—much
less one that would rise to the level of manifest disregard of
the law.

                               V.

       Pullman twice agreed to settle disputes arising under
the May 2002 agreement through arbitration, first in the
agreement itself and again by stipulating to do so in the
District Court. Having made that commitment, he is now
bound by the terms of his bargain. Because we see no
 33
   Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70
F.3d 418, 421 (6th Cir. 1995).
 34
   Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bobker,
808 F.2d 930, 933 (2d Cir. 1986).
 35
      Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003).

                               12
unfairness in the arbitrators’ conduct, we will affirm the
judgments of the District Court.

                           13