Court Opinion

ID: 4223671
Source: CourtListenerOpinion
Date Created: 2017-11-27 20:00:32.857084+00
Date Added: 2024-06-11T07:47:51.766729
License: Public Domain

UNPUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT

                                      No. 17-1346

STEPHEN FRYE; NDEGE NDOGO, INC.; JULIE A. GRAF,

                    Petitioners - Appellants,

             v.

WILD BIRD CENTERS OF AMERICA, INC.,

                    Respondent - Appellee.

Appeal from the United States District Court for the District of Maryland, at Greenbelt.
Theodore D. Chuang, District Judge. (8:16-cv-03216-TDC)

Submitted: September 29, 2017                               Decided: November 27, 2017

Before MOTZ and FLOYD, Circuit Judges, and HAMILTON, Senior Circuit Judge.

Affirmed by unpublished per curiam opinion.

Harry Martin Rifkin, LAW OFFICES OF HARRY M. RIFKIN, Baltimore, Maryland, for
Appellants. Eric L. Yaffe, Whitney A. Fore, GRAY, PLANT, MOOTY, MOOTY &
BENNETT, P.A., Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Stephen Frye, Julie A. Graf, and Ndege Ndogo, Inc. (collectively, “Appellants”)

appeal from the district court’s order denying their petition to vacate an arbitration award

entered in favor of Wild Bird Centers of America, Inc. (“WBCA”) and confirming the

award. We affirm.

       Appellants entered into a 10-year franchise agreement (“the agreement”) with

WBCA to operate a Wild Bird Center store in Boulder, Colorado. Appellants did not

renew the agreement and continued to operate the store past the agreement’s expiration.

Contending that Appellants were in violation of the agreement’s two-year non-compete

clause, WBCA submitted the matter to mandatory arbitration. Applying Maryland law as

called for in the agreement, the arbitrator found in favor of WBCA and imposed an

injunction prohibiting Appellants from violating the terms of the non-compete clause for

two years from the date of Appellants’ compliance.

       We review the district court’s denial of a motion to vacate an arbitration award de

novo and its factual findings for clear error.       MCI Constructors, LLC v. City of

Greensboro, 610 F.3d 849, 857 (4th Cir. 2010). “[O]ur authority to review the arbitration

award[] at issue, like the authority of the district court to do the same, is substantially

circumscribed.” Id. (alteration and internal quotation marks omitted). “[T]he scope of

judicial review for an arbitrator’s decision is among the narrowest known at law because

to allow full scrutiny of such awards would frustrate the purpose of having arbitration at

all—the quick resolution of disputes and the avoidance of the expense and delay

associated with litigation.”     Id. (internal quotation marks omitted).         “[N]either

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misinterpretation of a contract nor an error of law constitutes a ground on which an award

can be vacated,” and “as long as the arbitrator is even arguably construing or applying the

contract and acting within the scope of his authority, that a court is convinced he

committed serious error does not suffice to overturn his decision.” Id. at 861, 862

(internal quotation marks omitted).

       Before a reviewing court will vacate an arbitration award, “the moving party must

sustain the heavy burden of showing one of the grounds specified in the Federal

Arbitration Act . . . or one of certain limited common law grounds.” Id. at 857. The

statutory ground relevant here is “where the arbitrator[] exceeded [his] powers, or so

imperfectly executed them that a mutual, final, and definite award upon the subject

matter submitted was not made.” 9 U.S.C. § 10(a)(3) (2012). The relevant common law

grounds for vacating are “where an award fails to draw its essence from the contract” and

where “the award evidences a manifest disregard of the law.” MCI Constructors, 610

F.3d at 857 (internal quotation marks omitted).

       “[A]n arbitration award does not fail to draw its essence from the agreement

merely because a court concludes that an arbitrator has misread the contract,” but “only

when the result is not rationally inferable from the contract,” such as when “an arbitrator

has based his award on his own personal notions of right and wrong.” Patten v. Signator

Ins. Agency, Inc., 441 F.3d 230, 235 (4th Cir. 2006) (internal quotation marks omitted).

“In such circumstances, a federal court has no choice but to refuse enforcement of the

award.” Id. (internal quotation marks omitted). “[A] manifest disregard of the law is

established only where the arbitrator understands and correctly states the law, but

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proceeds to disregard the same,” such as “disregard[ing] or modif[ying] unambiguous

contract provisions.” Id. (brackets and internal quotation marks omitted).

       Appellants first claim that the arbitrator manifestly disregarded the law, exceeded

his powers, and failed to draw the award’s essence from the agreement. This is so, they

argue, because the non-compete clause did not apply here, where the agreement had

“expired,” and the clause only applied upon the agreement’s “termination.”

       We conclude that Appellants fail to show the district court erred in confirming

enforcement of the non-compete clause.         Appellants’ claims do not extend beyond

alleging that the arbitrator misinterpreted the agreement. See MCI Constructors, 610

F.3d at 861. Appellants do not argue that the arbitrator “based his award on his own

personal notions of right and wrong” or that he correctly stated the law but then

disregarded it. See Patten, 441 F.3d at 235. Because the non-compete clause itself states

that it applies “after termination,” while a later section states that the non-compete clause

applies “[i]n the event of termination or expiration of this Agreement for any reason,” the

provisions are at worst ambiguous, and at best, support WBCA’s position. Therefore, the

arbitrator’s application of the non-compete clause did not disregard or modify

unambiguous contract provisions and thus meets the “arguable” standard. See Patten,

441 F.3d at 235 (noting that arbitrator who modifies or ignores unambiguous provisions

of contract acts in manifest disregard of law); MCI Constructors, 610 F.3d at 857 (“As

long as the arbitrator[] [is] even arguably construing or applying the contract, . . . [the]

award[] will not be disturbed.” (internal quotation marks omitted)). Further, any failure

of the arbitrator to construe ambiguous terms in the agreement against WBCA—the

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drafter—would not warrant vacating the award. See MCI Constructors, 610 F.3d at 861-

62.

       Citing Nationwide Mutual Insurance Co. v. Hart, 534 A.2d 999 (Md. Ct. Spec.

App. 1988), and PADCO Advisors, Inc. v. Omdahl, 185 F. Supp. 2d 575 (D. Md. 2002),

Appellants next contend that even if the non-compete clause applied, the arbitrator’s

extension of its terms to 24 months from compliance should be vacated because it does

not draw from the essence of the agreement, manifestly disregards the law, and exceeds

the arbitrator’s authority.

       We conclude that Appellants fail to demonstrate circumstances warranting

vacating the injunction. In PADCO, applying Maryland law, the district court imposed a

permanent injunction that accounted for periods of noncompliance with non-compete

provisions on the grounds that “[i]t is reasonable for PADCO to expect the full twenty-

four months of non-competition to which it is entitled.”      185 F. Supp. 2d at 578.

Nationwide is distinguishable because it concerned a preliminary injunction and non-

compete restrictions with a much more indefinite term. 534 A.2d at 1000, 1002-03.

Thus, we find that the arbitrator was “arguably construing or applying the contract and

acting within the scope of his authority” in extending the non-compete period to account

for Appellants’ noncompliance. See MCI Constructors, 610 F.3d at 861-62 (internal

quotation marks omitted).

       Appellants also fail to show that the arbitrator “based his award on his own

personal notions of right and wrong” or “underst[ood] and correctly state[d] the law, but

proceed[ed] to disregard the same.” See Patten, 441 F.3d at 235 (internal quotation

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marks omitted). While Appellants argue that the injunction is indefinite and improperly

extends the non-compete period, unlike the indefinite term in Nationwide, the term here

is limited to two years, and Appellants have not shown prejudice from the extension

because they have yet to cease operating the same sort of business they did as a WBCA

franchisee. Appellants’ argument that the arbitrator disregarded unambiguous terms and

imposed a longer compliance period than contracted for is unavailing because the parties

bargained for two years of compliance. See PADCO, 185 F. Supp. 2d at 578. Further,

Appellants fail to point to any authority to support their assertion that WBCA was

required to seek a temporary restraining order or preliminary injunction in order to obtain

an extension of the non-compete period.

       Finally, to the extent that Appellants seek to raise new claims on appeal regarding

the arbitrator’s alleged failure to rule on whether certain aspects of their store’s operation

violate the agreement, they fail to demonstrate exceptional circumstances warranting

consideration of these claims. See In re Under Seal, 749 F.3d 276, 285 (4th Cir. 2014)

(“[A]bsent exceptional circumstances, we do not consider issues raised for the first time

on appeal.” (ellipsis omitted)).

       Accordingly, we affirm the judgment of the district court. We dispense with oral

argument because the facts and legal contentions are adequately presented in the

materials before this court and argument would not aid the decisional process.

                                                                                 AFFIRMED

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