Court Opinion

ID: 185379
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:18+00
Date Added: 2024-06-11T17:26:15.421169
License: Public Domain

246 F.3d 702 (D.C. Cir. 2001)
Linda E. LaPrade, Appellantv.Kidder, Peabody & Co., Inc., Appellee
No. 00-7082
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 16, 2001Decided April 24, 2001

[Copyrighted Material Omitted]
Appeal from the United States District Court  for the District of Columbia (No. 91cv03330)
Steven W. Teppler argued the cause for appellant.  With  him on the briefs was Frazer Walton, Jr.
Kathy B. Houlihan argued the cause for appellee.  With  her on the brief was Andrew J. Schaffran.
Before:  Williams, Sentelle and Rogers, Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge:

1
Linda E. LaPrade appeals the  confirmation of an arbitration award requiring her to pay a portion of the forum fees for arbitration of her statutory and  non-statutory claims against her former employer.1  She contends that assessment of the forum fees contravenes Cole v.  Burns International Security Services, 105 F.3d 1465 (D.C.  Cir. 1997), where the court held when a federal statutory  claim is subjected to arbitration pursuant to an arbitration  agreement executed as a condition of employment, an employee cannot be required to pay arbitration-related costs that are  analogous to a judge's salary or expenses in a traditional  judicial forum.  Because LaPrade has not met her burden of  demonstrating that the arbitrators acted in manifest disregard of the law, we affirm.

I.

2
In January 1989 LaPrade began working for Kidder Peabody in the State of New York as an Assistant Vice President  and Manager of the New Issue Agency Syndicate, and in July  1989 she was promoted to Vice President, Product ManagerAgency Bond Trading.  Her position at Kidder Peabody  required her to be a registered representative in the securities industry, which, in turn, required that she execute a  Uniform Application for Securities Industry Registration or  Transfer, or "Form U-4."2  By signing the Form U-4 LaPrade agreed to arbitrate any claims that might arise between her and Kidder Peabody.3

3
Following a series of disagreements with her employer,  LaPrade left Kidder Peabody in October 1991.  Thereafter,  she sued her former employer in the United States District  Court for the District of Columbia for breach of contract,  fraud, and for violations of federal and state law.  Over  LaPrade's objection, the district court granted Kidder Peabody's motion to stay the lawsuit pending arbitration.  The parties then pursued arbitration before the National Association of Securities Dealers, Inc. ("NASD") under the terms of  the arbitration clause contained in LaPrade's Form U-4.

4
In the arbitration proceedings, LaPrade claimed gender  discrimination under Title VII and New York state law, and  denial of equal pay under New York state law and the  Federal Equal Pay Act, as well as common law defamation  and fraud.  The arbitration panel conducted seven prehearing conferences and 67 hearing sessions from November  1994 to May 1999.  In October 1999, the arbitration panel  dismissed LaPrade's statutory claims for discrimination under New York and federal law, but granted her injunctive  relief with respect to her Form U-5 and ordered Kidder  Peabody to pay her $65,000.00.4  The panel decision stated  that "all other claims not specifically addressed ... are  denied in their entirety, including defamation and fraud."  In  addition, while ordering that "[e]ach party shall be responsible for its own attorneys' fees and other costs related to this  arbitration," the arbitration panel assessed forum fees, total ing $69,800.00, save 12%, against Kidder Peabody.  See  NASD Code of Arbitration Procedure Rule 10205(c).  Thus,  LaPrade was ordered to pay 12%, or $8,376.00.5

5
Kidder Peabody returned to the district court, filing a  motion to lift the stay and confirm the arbitration award. LaPrade filed a cross motion to vacate the arbitration award  insofar as it directed her to pay $8,376.00 in forum fees.  The  district court confirmed the arbitration award.  Concluding  that the law regarding the assessment and allocation of  arbitral forum fees was neither "well defined, explicit, [nor]  clearly applicable" to her case, the district court rejected  LaPrade's argument that the arbitration panel had acted in  manifest disregard of the governing law in this circuit in  assessing and allocating arbitral fees.  In the district court's  view Cole was not dispositive, and it followed Sobol v. Kidder,  Peabody & Co., Inc., 49 F. Supp. 2d 208 (S.D.N.Y. 1999).  In  Sobol the court distinguished Cole and ruled that assessment  against a former employee of half of the arbitral forum fees  neither offended public policy nor discouraged arbitration  because NASD rules authorized the sharing of expenses and  arbitration is generally less expensive than traditional litigation in court.  Id. at 224.  Finally, noting the scope of  permissible fees identified in Cole, the district court found  that LaPrade had not demonstrated that the panel's award  lacked colorable support in the record.

II.

6
It is well settled that a court's review of an arbitration  award is limited.  In addition to the limited statutory grounds  on which an arbitration award may be vacated,6 "arbitration  awards can be vacated [only] if they are in 'manifest disregard of the law,' " Cole, 105 F.3d at 1486 (quoting First  Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)),  or "if they are contrary to 'some explicit public policy' that is  'well defined and dominant' and ascertained 'by reference to  the laws or legal precedents.' "  Id. (quoting United Paperworks Int'l Union v. Misco, Inc., 484 U.S. 29, 43 (1987)). Manifest disregard of the law "means more than error or  misunderstanding with respect to the law."  Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1178 (D.C. Cir. 1991)  (citing Sargent v. Paine Webber Jackson & Curtis, Inc., 882 F.2d 529, 532 (D.C. Cir. 1989)).  Consequently,

7
to modify or vacate an award on this ground, a court must find that (1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.

8
DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d  Cir. 1997) (quotations omitted);  see also Glennon v. Dean  Witter Reynolds, Inc., 83 F.3d 132, 136 (6th Cir. 1996).

9
As the party seeking to vacate or otherwise modify the  arbitration award, LaPrade bears the burden of demonstrating that the arbitration panel acted in manifest disregard of  the law.  See Al-Harbi v. Citibank, N.A., 85 F.3d 680, 683 (D.C. Cir. 1996);  DiRussa, 121 F.3d at 825;  cf. Green Tree  Fin. Corp. v. Randolph, 531 U.S. 79, ----, 121 S. Ct. 513, 522  (Dec. 11, 2000);  Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991).  Our review of the district court's factual  findings in the order confirming the arbitration award is for  clear error, while the court reviews questions of law de novo. See First Options, 514 U.S. at 947-48.

10
In Gilmer, the Supreme Court held that federal statutory  claims alleging age discrimination in employment could be  subjected to compulsory arbitration pursuant to an arbitration agreement that an employee was required to sign as a  condition of employment.  See Gilmer, 500 U.S. at 23.  Subsequently, in Cole, this court was confronted with the question "can an employer condition employment on acceptance of  an arbitration agreement that requires the employee to submit his or her statutory claims to arbitration and then requires the employee to pay all or part of the arbitrators'  fees?"  Cole, 105 F.3d at 1483.  The district court had dismissed Cole's complaint alleging claims under Title VII and  compelled arbitration pursuant to the parties' agreement.  Id.  at 1467.  This court upheld the arbitration agreement.  Id. at  1485.  But reasoning, in reliance on Gilmer, that there was no  reason to conclude that the Supreme Court would have  approved mandatory arbitration where the employee had to  pay the cost of the arbitrator's services, id. at 1484, the court  also concluded that "Cole could not be required to agree to  arbitrate his public law claims as a condition of employment if  the arbitration agreement required him to pay all or part of  the arbitrator's fees or expenses."  Id. at 1485.  The court  noted that the arbitration agreement executed by Cole did  not explicitly address the issue and merely incorporated the  American Arbitration Association rules, which were silent on  the question of which party should bear the arbitrator's fees  and expenses.  Id.  Thus, to uphold the validity of the  parties' contract, the court interpreted the arbitration agreement to require the former employer to pay all arbitrators'  fees in connection with the resolution of Cole's claims.7 Id. at  1486.

11
Contrary to LaPrade's contention that the assessment of  arbitral forum fees contravenes Cole, Cole does not bar the  assessment of all forum fees against an employee.  In Cole  the court explained that an employee who executed a compulsory arbitration provision as a condition of employment could  be "required to assume the [reasonable] costs of filing fees  and other administrative expenses" arising from arbitration of  statutory claims because "parties appearing in federal court"  may likewise be required to pay such costs.  Id. at 1484. Other than by misinterpreting Cole to afford her a right to  arbitration as a virtually cost-free alternative to traditional  court proceedings, LaPrade makes no claim that the panel  otherwise lacked authority to assess and allocate forum fees. LaPrade nonetheless contends that the district court erred in  confirming the arbitral award because the assessment of  forum fees violates public policy by burdening the assertion of  her federal statutory right to be free from gender discrimination.  Unfortunately for LaPrade, she has not met her burden  of demonstrating that the arbitration panel acted in manifest  disregard of the law or in violation of public policy.  See AlHarbi, 85 F.3d at 683;  DiRussa, 121 F.3d at 825;  cf. Green  Tree, 121 S. Ct. at 522;  Gilmer, 500 U.S. at 26.

12
First, LaPrade makes no showing that the arbitration  panel, which was aware of Cole, "refused to apply [Cole] or  ignored [Cole] altogether."  DiRussa, 121 F.3d at 821;  see  also Kanuth, 949 F.3d at 1182.  Rather, she relies on the  unjustified assumption that the forum fees assessed against  her are the type of costs forbidden by Cole.8  Under the NASD's rules, two of the arbitrators were entitled to compensation in the amount of $200.00 per hearing session while the  chairperson of the panel was entitled to $275.00 per hearing  session.9  Therefore, of the $1,000.00 assessed for each hearing session with the full panel, $325.00 cannot be characterized as arbitrators' compensation.  LaPrade's assessment, in  turn, appears to be well below that amount.10

13
In any event, there is a substantial possibility that, fully  consistent with Cole, the entire assessment against LaPrade  covers only the costs associated with her non-statutory  claims.  Given the lengthy nature of the parties' proceedings,  spanning six years and involving 74 arbitral sessions, it is  reasonable to conclude, as Kidder Peabody suggests, that the  forum fees assessed against LaPrade were attributable to  arbitration of her non-statutory claims.  LaPrade protests  that Kidder Peabody's proposed reasonable conclusion is  speculative, but she has failed to provide an evidentiary basis  for any alternate conclusion, and it is her burden to do so. See Al-Harbi, 85 F.3d at 683;  DiRussa, 121 F.3d at 825;  cf.  Green Tree, 121 S. Ct. at 522;  Gilmer, 500 U.S. at 26.

14
Second, in articulating the " 'liberal federal policy favoring  arbitration agreements,' " Gilmer, 500 U.S. at 25 (quoting  Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), the Supreme Court explained that "so long  as the prospective litigant effectively may vindicate his or her  statutory cause of action in the arbitral forum, the [statutory  right created by Congress] will continue to serve both its  remedial and deterrent function[s]."  Id. at 28 (citing Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985)).  While the court in Cole declined to  read Gilmer "as holding that an arbitration agreement is enforceable no matter what rights it waives or what burdens  it imposes," 105 F.3d at 1482, LaPrade has not shown that the  arbitration panel manifestly disregarded Cole in assessing a  limited amount of forum fees against her.  LaPrade makes no  claim that the possibility of a large assessment arising from  arbitration of her claims prevented her from attempting to  vindicate her rights.  See Green Tree, 121 S. Ct. at 522. Neither does she claim that the arbitration panel failed to  consider the evidence that she submitted to show she was  financially unable to pay any assessment.  That evidence  consisted of her W-2 forms from 1993 through 1998 and a  single commission statement for January 1999, which the  arbitration panel might reasonably view as an incomplete  portrait of her financial resources.  Because LaPrade has not  demonstrated that the assessment against her runs afoul of  the balance of public policies struck in Cole, her effort to have  the assessment vacated on public policy grounds fails.

15
Accordingly, we affirm the district court's order confirming  the arbitration award.

Notes:

1
  This case was previously before the court on a matter unrelated to the instant appeal.  See LaPrade v. Kidder, Peabody & Co.,  146 F.3d 899 (D.C. Cir. 1998).

2
  See 15 U.S.C. 78s (1994);  17 C.F.R. 240.15b7-1 (2000); NASD Regulation Rules 1031 (a)-(b), 1013(a)(2)(B), http://se  cure.nasdr.com/wbs/NETbos.dll?RefShow?ref=NASD4;&xinfo=/go  odbye.htm (last visited March 28, 2001).

3
  LaPrade's Form U-4 states in relevant part:
I agree to arbitrate any dispute, claim, or controversy that may arise between me and my firm, or a customer, or any other person, that is required to be arbitrated under the rules, constitution, or by-laws of the organizations with which I register....

4
  After LaPrade left the firm, Kidder Peabody filed a Uniform  Termination Notice for Securities Industry Registration, or "Form  U-5," stating that "[d]uring the course of an inquiry by firm  personnel, Ms. LaPrade initially provided information which the  firm believed to be inaccurate (inadvertently, by her account), which  she subsequently clarified.  She was then permitted to resign."  See  15 U.S.C. 78o-5 (1994 & Supp. V 1999);  15 U.S.C. 78ff(a)  (1994);  17 C.F.R. 400.4 (2000).  As part of the relief ordered by  the arbitration panel, Kidder Peabody was ordered to revise the  explanation section of the Form U-5 to read:  "During the course of  an inquiry by firm personnel, Ms. LaPrade offered to provide her  cooperation and information if the firm agreed to permit her to  resign, and the firm agreed."

5
  The arbitration panel assessed forum fees for six pre-hearing  conferences at $300.00 each, one pre-hearing conference with the  full panel at $1,000.00, and 67 hearing sessions at $1,000.00 per  session.  See NASD Code of Arbitration Procedure Rule 10205(k)  (schedule of fees).  Deducting the balances previously deposited,  the panel directed LaPrade to pay $6,776.00, and Kidder Peabody  to pay $50,824.00.  The assessment against LaPrade was independent of the $250.00 non-refundable filing fee that she had previously  paid;  the panel ordered that the filing fee be retained by NASD.

6
  Under the Federal Arbitration Act, 9 U.S.C. 10 (1994), an  arbitration award may be vacated where:
(1) the award was procured by corruption, fraud, or undue means;  (2) there was evident partiality or corruption in the arbitrators, or either of them;  (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy;  or of any other misbehavior by which the rights of any party have been prejudiced;  or (4) 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.
LaPrade makes no claim of such error here.

7
  In Cole, the court defined "arbitrators' fees" to include not only the arbitrator's honorarium, but also the arbitrator's expenses and any other costs associated with the arbitrator's services.
105 F.3d at 1484 n.15.

8
  At oral argument, LaPrade noted that she paid the $250.00  filing fee and $5.00 in copying costs, that the parties paid court  reporter fees, and that the proceedings were conducted on the  premises of the NASD.  Consequently, LaPrade argued, because  there were no other costs left to be paid, the forum fees assessed by  the arbitration panel must be the type prohibited by Cole.

9
 See NASD Code of Arbitration Procedure Rule IM-10104, at  http://www.nasdadr.com/arb_code/arb_code#IM_10104 (last updated March 15, 2001).

10
 Kidder Peabody suggests in its brief that LaPrade's per  session share of the non-compensation costs ($325.00, or $1,000.00  minus a total of $675.00) is $113.19, and LaPrade does not contest  this figure in her reply brief.