Court Opinion

ID: 1035887
Source: CourtListenerOpinion
Date Created: 2013-08-01 00:00:02.975387+00
Date Added: 2024-06-11T15:15:30.744407
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 12-1519

                  DORAL FINANCIAL CORPORATION,

                      Plaintiff, Appellant,

                               v.

          CALIXTO GARCÍA-VÉLEZ; CARMEN T. GARCÍA-VÉLEZ,

                     Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE DISTRICT OF PUERTO RICO

        [Hon. Aida M. Delgado-Colón, U.S. District Judge]

                             Before

                       Lynch, Chief Judge,
              Torruella and Selya, Circuit Judges.

     Roberto A. Cámara-Fuertes, with whom José L. Ramírez-Coll and
Fiddler, González & Rodríguez, PSC, were on brief for appellant.
     José Luis González-Castañer, with whom González Castañer,
C.S.P., was on brief for appellees.

                          July 31, 2013
          TORRUELLA, Circuit Judge.       Plaintiff-Appellant Doral

Financial Corp. ("Doral") filed this appeal after the district

court denied its petition to vacate an arbitral award.    According

to Doral, the district court incorrectly rejected its contention

that the arbitration tribunal engaged in misconduct by denying the

issuance of pre-hearing and hearing subpoenas.    Doral also argues

that the district court erred in its determination that the

tribunal had authority to order the payment of pre-award interest.

After carefully considering the record, we affirm.

                          I. Background

          When Doral terminated Defendant-Appellee Calixto García-

Vélez as the President of its Consumer Banking Division, García-

Vélez began the arbitration proceedings underlying this appeal

seeking the severance compensation that he felt was contractually

due.1   Doral opposed the filing and argued that García-Vélez's

employment contract required no severance payment because the

termination was "for cause."     Shortly thereafter, García-Vélez

accepted a top executive position at the Miami branch of a bank

with whom Doral competed in Puerto Rico.      He notified Doral by

letter about his new employment, and Doral responded with an

1
    The employment contract had an arbitration clause whereby
García-Vélez and Doral "agree[d] that any controversy or claim
arising   out of, or relating to this Agreement, or the breach
thereof . . . shall be settled by confidential arbitration . . . in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association." There is no dispute that this clause
mandated the arbitration of García-Vélez's claims.

                               -2-
amendment to its submission to the arbitration tribunal, adding the

claim that it owed no severance to García-Vélez because he had

breached the non-competition clause of his employment contract.

Doral also moved the tribunal for injunctive relief against García-

Vélez and commenced parallel litigation in state court against his

employer.2

             The arbitration tribunal held a preliminary arbitration

conference on March 23, 2009.       It subsequently issued a scheduling

order reflecting the agreements of the parties at the conference.

As relevant here, the order established May 15, 2009, as the

deadline for final requests for information, and August 7, 2009,

for the submission of a final witness list.         The order also stated

that, "if a party wishes to issue a subpoena to a third party

. . . the parties shall first confer and determine if there is any

disagreement to the date and propriety of the subpoena. . . . Any

dispute, as to a subpoena, shall be resolved by the Tribunal

. . . ."

             On   September   4,   2009,   five   days    before   the   first

arbitration hearing was scheduled to begin, Doral filed an "Urgent

Motion to Stay the Arbitration Proceedings," stating that the Miami

branch of the bank for which García-Vélez allegedly worked had

merged with its Puerto Rico holding company.             According to Doral,

2
   Early into the arbitration, Doral voluntarily dismissed the
claim for injunctive relief.

                                     -3-
the merger proved the falsity of García-Vélez's contention that he

exclusively worked for the Miami branch.                  The tribunal, however,

denied    the    stay,     and   the   arbitration        hearings    commenced   as

scheduled on September 9, 2009.

            García-Vélez testified during the first days of the

arbitration hearings.            However, on September 14, 2009, due to a

medical situation afflicting Doral's counsel, his testimony was

interrupted and the hearings were postponed until December 14,

2009.     Doral took advantage of the two-month recess to serve

García-Vélez with a first set of interrogatories and a request for

production      of   documents.        Doral      also   notified    García-Vélez's

counsel   that       it   intended     to    request     pre-hearing   third-party

subpoenas from his employer.                García-Vélez did not respond, and

Doral filed a formal application with the tribunal to issue the

pre-hearing subpoenas.3

            García-Vélez immediately opposed the formal request.                  He

argued that the subpoenas were untimely and that they sought to

change the schedule agreed upon by the parties.                García-Vélez also

argued that the granting of the subpoenas would likely require the

3
   The subpoenas sought 41 discovery items, most of them as broad
and open ended as the following three examples: (1) "A copy of any
and all documents exchanged . . . [with] García-Vélez from the year
2004 to the present . . . ."; (2) "A copy of any and all documents
analyzing the merger . . . ."; and (3) "A copy of any diagram,
chart, flowchart, or organizational tree depicting the internal
corporate structure of [the holding company] at present."

                                            -4-
arbitration to be further delayed.          The tribunal agreed with

García-Vélez and denied Doral's requests as untimely.

           Doral remained undeterred. On December 2, 2009, it filed

an application for hearing subpoenas directed at García-Vélez's

employer, seeking information and documents of the same nature as

those sought through the pre-hearing subpoenas.           Doral also moved

the   tribunal   to   reconsider   its   decision    on   the   pre-hearing

subpoenas, explaining that it had learned about García-Vélez's

possible involvement with the merged Puerto Rico holding company

well after the discovery deadline had lapsed.4

           The tribunal denied the issuance of hearing subpoenas as

well as Doral's reconsideration motion.             As to the motion for

reconsideration, it found "the subpoenas . . . significantly

broader in scope than it would have permitted had the request been

timely submitted and the deadline for requesting such subpoenas has

long past."      The tribunal held the same regarding the hearing

subpoenas and added that Doral "could have/should have determined

the witnesses it needed during the exchange of information process;

and, it has had notice of the potential rebuttal witnesses it now

wants to call since the September 10, 2009 [hearing]."

           On December 11, 2009, the tribunal issued a written

decision further explaining the reasoning behind its prior order.

4
   Doral argued that García-Vélez misrepresented his relationship
with   the   holding  company   as  well   as  his   professional
responsibilities leading up to, and continuing after, the merger.

                                   -5-
There, the tribunal addressed the alleged misrepresentations by

García-Vélez, stating that "[t]he fact that [Doral] has maintained

the same claim against [García-Vélez] for his employment with . . .

the merged entity indicates that it should have requested the

information it believed relevant to its claim during the Exchange

of Information process."      The tribunal further established that

Doral "has been aware since the beginning of these proceedings of

the witnesses that it is now attempting to subpoena related to its

non-competition claim[, because,]        [f]or an extended period of

time[, Doral has] been engaged in collateral litigation with

[García-Vélez's] employer concerning the non-competition provision

in the Employment Agreement."

           The arbitration hearings resumed on December 14, 2009,

and Doral had the opportunity to cross-examine García-Vélez as well

as to present evidence of its own.      The tribunal then provided the

parties with the opportunity to file post-hearing briefs and

proposed awards.

           The award was issued soon thereafter. In pertinent part,

the   tribunal   found   García-Vélez   "entitled   to   be   compensated

pursuant to the terms of the Employment Agreement dealing with his

termination without cause."5     The tribunal also found that Doral

had failed to "establish that Mr. García-Vélez breached the non-

competition provision of the Employment Agreement" and held that he

5
    Doral has not challenged this finding.

                                  -6-
was entitled to pre-award interest pursuant to Rule 43(d) of the

Commercial    Arbitration      Rules.     The    arbitral       award   totaled

$2,396,609, including $163,008 in pre-award interest.6

           In due course, Doral filed suit in the district court

seeking   vacatur   of   the   award.     It    argued   that    the    tribunal

improperly denied the issuance of the subpoenas and thus engaged in

"misconduct in refusing to hear evidence pertinent and material to

the issue of Mr. García-Vélez'[s] violation of the non-compete

clause of the Employment Agreement."             Doral also posited that,

"[b]y awarding pre-award interest, the [a]rbitrator[s] . . .

exceeded [their] powers under the Employment Agreement and engaged

in a manifest disregard of the law."            In all, Doral charged the

tribunal with "refus[ing] to hear material and pertinent evidence,

manifest disregard of the law, manifest and gross misconduct . . .

egregious failure to receive, evaluate and properly weigh the

available evidence, and implausibl[y] reading . . . the Employment

Agreement."

           The district court denied the relief Doral sought in a

thorough written decision. Doral's reconsideration motion was also

denied, and this appeal timely ensued.

6
  Doral was also ordered to pay $33,000 in administrative fees and
$201,462 in arbitrators' compensation.

                                    -7-
                                II. Discussion

            We review de novo a district court's decision to vacate

or confirm an arbitration award.             UMASS Mem. Med. Ctr., Inc. v.

United Food & Commer. Workers Union, Local 1445, 527 F.3d 1, 5 (1st

Cir. 2008).   Our review, however, honors the parties' decision "to

have disputes settled by an arbitrator," United Paperworkers Int'l

Union v. Misco, Inc., 484 U.S. 29, 37-38 (1987), and recognizes

that the arbitration process seeks to ameliorate the time and

expenses generally associated with judicial proceedings,             Menorah

Ins. Co., Ltd. v. INX Reinsurance Corp., 72 F.3d 218, 223                  (1st

Cir. 1995).   See also Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20, 31 (1991) ("[B]y agreeing to arbitrate, a party trades the

procedures and opportunity for review of the courtroom for the

simplicity, informality, and expedition of arbitration.") (quoting

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S.

614, 628 (1985)) (internal quotations omitted). For those reasons,

our   de   novo   review   in   this    area    "is   extremely   narrow   and

exceedingly deferential," Wheelabrator Envirotech Operating Servs.

Inc. v. Mass. Laborers Dist. Council Local 1144, 88 F.3d 40, 43

(1st Cir. 1996), so deferential indeed that we have stated that

"[a]rbitral awards are nearly impervious to judicial oversight,"

Teamsters Local Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 61

(1st Cir. 2000).

                                       -8-
             The   limited   scope    of   our   review,    however,   "is   not

equivalent    to    granting      limitless    power   to   the   arbitrator."

Georgia-Pacific Corp. v. Local 27, United Paperworkers Int'l Union,

864 F.2d 940, 944 (1st Cir. 1988).           "Although we do not sit to hear

claims of factual or legal error by an arbitrator as an appellate

court does in reviewing decisions of lower courts, there are

limited exceptions to the general rule that arbitrators have the

last word."    Kashner Davison Sec. Corp. v. Mscisz,           531 F.3d 68, 74

(1st Cir. 2008) (internal quotations and citations omitted).                 One

of those exceptions is encompassed in 9 U.S.C. § 10(a)(3).                    As

relevant here, § 10(a)(3) requires vacatur of an award when "the

arbitrators were guilty of misconduct in refusing to . . . hear

evidence pertinent and material to the controversy . . . ."7                  Of

course, § 10(a)(3) does not require arbitrators to consider every

piece of relevant evidence presented to them.                  Hotels Condado

Beach, La Concha and Convention Ctr. v. Unión De Tronquistas Local

901, 763 F.2d 34, 40 (1st Cir. 1985) ("Every failure of an

arbitrator to hear relevant evidence does not constitute misconduct

requiring    vacatur   of    an   arbitrator's     award.").      "Vacatur    is

appropriate only when the exclusion of relevant evidence so affects

7
    Although Doral has not provided us with authority for the
proposition that a refusal to issue a subpoena qualify as a refusal
to hear evidence for purposes of § 10(a)(3), we need not (and do
not) decide this issue here, because Doral's contentions fail on
other grounds.

                                       -9-
the rights of a party that it may be said that he was deprived of

a fair hearing."      Id. (internal quotation and citation omitted).

             Doral clings like a limpet in the heaviest sea to the

"fair hearing" requirement subsumed in § 10(a)(3), urging us to

find that the tribunal abridged it in refusing to issue the

subpoenas.     Doral claims that this refusal in turn prevented the

introduction     of   relevant   evidence   regarding   García-Vélez's

potential breach of the non-compete clause.       Doral's position is

untenable for at least two reasons.

             First, the record is devoid of evidence showing that

Doral was not afforded a "fair hearing."          The "fair hearing"

requirement is rooted in due process concerns and thus calls for

(1) notice, and (2) an opportunity to present relevant evidence and

arguments. See Raytheon Co. v. Automated Bus. Sys., Inc., 882 F.2d

6, 8-9 (1st Cir. 1989).8     Doral does not argue (nor could it) that

the tribunal failed to provide adequate notice as to the schedule

governing the arbitration proceedings.      In fact, it is undisputed

that the scheduling order the tribunal issued was agreed upon by

the parties.     Moreover, the record before us unequivocally shows

that the tribunal granted Doral adequate notice in connection with

the process governing the issuance of subpoenas.        The scheduling

order speaks for itself in this regard: "if a party wishes to issue

8
   Doral makes no claim under 9 U.S.C. § 10(a)(2) that there was
any partiality in the arbitrators.

                                  -10-
a subpoena to a third party . . . the parties shall first confer

and   determine   if   there   is   any   disagreement     to   the    date   and

propriety of the subpoena . . . Any dispute, as to a subpoena,

shall be resolved by the Tribunal. . . ."

           The tribunal also provided Doral ample opportunity to

present its position regarding the subpoenas.                   In fact, the

tribunal   allowed     Doral   three   opportunities       at   bat:    (1)   the

application for pre-hearing subpoenas; (2) the application for

hearing subpoenas; and (3) the motion to reconsider the pre-hearing

subpoenas order. On all three occasions, Doral had the opportunity

to argue why the subpoenas were warranted even though the deadline

to request information had lapsed, the hearings were already

underway, and García-Vélez had already testified at length.

           The    tribunal     afforded     Doral   many   other      procedural

safeguards, including the health-related two-month continuance its

counsel obtained as well as the opportunity to (1) weigh in on the

scheduling order governing the arbitration proceedings; (2) cross-

examine García-Vélez; (3) introduce evidence of its own; and (4)

file a post-hearing memorandum and a proposed award.             Furthermore,

the tribunal provided Doral with ample support, in written and

unequivocal form, for its decision to deny the subpoenas and for

its arbitration award, despite having no obligation to do so.                 See

Zayas v. Bacardí Corp., 524 F.3d 65, 70 (1st Cir. 2008) ("Although

arbitrators frequently elect to explain their decisions in written

                                     -11-
opinions, they are under no cumpulsion to do so.").                    We are

therefore not persuaded by Doral's arguments that the tribunal

failed to satisfy the "fair hearing" exigencies behind § 10(a)(3).

            Second, Doral's position is premised on unsupported and

unwarranted factual assumptions.          On this front, we note that even

though    Doral's   proposed    subpoenas    requested    a   wide   range   of

information from García-Vélez's employer, it is uncertain whether

such     information   was    available     for   production.        But   more

importantly,    even   assuming     that    the   information    sought      was

accessible to Doral, there is nothing concrete in the record that

would    indicate   that     García-Vélez   in    fact   violated    the   non-

competition clause. In other words, all that Doral has to offer in

support of its position on appeal is the hunch that the subpoenas

would have potentially yielded relevant information for its case.

We cannot vacate an arbitral award based on sheer speculation

alone.    See, e.g., Cytyc Corp. v. DEKA Prods. Ltd., 439 F.3d 27, 36

(1st Cir. 2006) (finding vacatur under § 10(a)(3) unwarranted

because, among other things, movant failed to produce concrete

evidence supporting its claim); cf. Hoteles Condado Beach, La

Concha and Convention Ctr., 763 F.2d at 40 (vacating award under

§ 10(a)(3) upon a concrete showing that the evidence excluded "was

both central and decisive" for the movant's case).

            As it did in the district court, Doral places undue

weight on the "misrepresentations" García-Vélez allegedly made

                                    -12-
during the arbitration in connection with the merger of his

employers.     Doral presented the same argument to the arbitration

tribunal.      But the tribunal discarded it, reasoning, inter alia,

that "[t]he fact that [Doral] has maintained the same claim against

[García-Vélez] for his employment with . . . the merged entity

indicates that it should have requested the information it believed

relevant to its claim during the Exchange of Information process."

We have no authority to second guess the tribunal's decision on

this issue. See       Asociación de Empleados del E.L.A.             v. Unión

Internacional de Trabajadores de la Industria de Automóviles, et

al., 559 F.3d 44, 47 (1st Cir. 2009) ("We do not sit as a court of

appeal to hear claims of factual or legal error by an arbitrator or

to consider the merits of the award."); see also Prudential-Bache

Sec.,   Inc.    v.   Tanner,   72   F.3d    234,   240-41   (1st   Cir.   1995)

(declining to revisit arguments presented to, and rejected by, an

arbitration tribunal); Dean v. Sullivan, 118 F.3d 1170, 1173 (7th

Cir. 1997) (stating that courts have no authority to consider

afresh arguments decided by an arbitration tribunal).9

            In sum, Doral's contentions ring hollow.               The record

before us contains no evidence to support a finding that the

9
    Nor can we second guess, as Doral invites us to do, the
arbitration tribunal's finding regarding the improper scope of
Doral's subpoenas or the tribunal's understanding of the procedural
exigencies set by its scheduling order. See Keebler Co. v. Truck
Drivers, Local 170, 247 F.3d 8, 11 (1st Cir. 2001) ("[T]he
arbitrator is free to set his own rules of procedure so long as he
stays within the bounds of fundamental fairness.").

                                     -13-
tribunal engaged in § 10(a)(3) misconduct.     On the contrary, the

record presented to us shows that Doral lost the arbitration fairly

and squarely, after the tribunal afforded it more than adequate

process to present its side of the dispute. Accordingly, we are in

no position to grant the relief Doral requests under § 10(a)(3).

          The same holds true for the relief Doral seeks in

connection with the grant of pre-award interest.    As stated above,

Doral argues that the tribunal exceeded its authority in awarding

pre-award interest to García-Vélez and asks us to vacate that

portion of the award.   We cannot do so.   The record is uncontested

that the parties agreed to arbitrate their dispute in accordance

with the Commercial Arbitration Rules of the American Arbitration

Association.    In granting pre-award interest to García-Vélez, the

tribunal explicitly referenced Rule 43(d)(1) of the Commercial

Arbitration Rules, which, in pertinent part, establishes that

"[t]he award of the arbitrator(s) may include . . . interest at

such rate and from such date as the arbitrators(s) may deem

appropriate."    The record contains no evidence that the parties

limited the applicability of Rule 43(d)(1) in any way.   Therefore,

Doral cannot now be heard to challenge the grant of pre-award

interest on the ground that the tribunal lacked the very same

authority that the parties explicitly granted to it by agreeing to

arbitrate under the Commercial Arbitration Rules of the American

                                -14-
Arbitration Association.     To say more on this front would be to

carry coals to Newcastle.

                            III. Conclusion

            For the foregoing reasons, the district court decision is

affirmed.

            Affirmed.

                                 -15-