Court Opinion

ID: 2653118
Source: CourtListenerOpinion
Date Created: 2014-02-13 01:01:16.251661+00
Date Added: 2024-06-11T09:11:10.224557
License: Public Domain

FILED
                                                          United States Court of Appeals
                                                                  Tenth Circuit

                                                               February 12, 2014
                 UNITED STATES COURT OF APPEALS
                                                              Elisabeth A. Shumaker
                                                                  Clerk of Court
                               TENTH CIRCUIT

 ADVISER DEALER SERVICES, INC.;
 MEEDER ASSET MANAGEMENT,
 INC.; MEEDER FINANCIAL, INC.,

          Petitioners-Appellees/
          Cross-Appellants,
                                                   No. 13-1178 & 13-1187
 v.
                                               (D.C. No. 1:12-CV-01104-REB)
                                                          (D. Colo.)
 ICON ADVISERS, INC.; ICON
 DISTRIBUTORS, INC.; ICON
 MANAGEMENT & RESEARCH
 CORPORATION,

          Respondents-Appellants/
          Cross-Appellees.

                          ORDER AND JUDGMENT *

Before LUCERO, SEYMOUR, and TYMKOVICH, Circuit Judges.

      This appeal and cross-appeal arise out of an arbitration proceeding before

the Financial Industry Regulatory Authority (“FINRA”) between ICON Advisers,

Inc., ICON Distributors, Inc., and ICON Management & Research Corporation

      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, or collateral estoppel. Although the
court generally disfavors the citation of an order and judgment, it may be cited for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
(collectively “ICON”), and Adviser Dealer Services, Inc., Meeder Asset

Management, Inc., Meeder Financial, Inc. (collectively “Meeder”), and

Stephen C. Holmes. ICON appeals the district court’s order vacating the

arbitration panel’s award to ICON of $164,170 in attorneys’ fees, and Meeder

cross-appeals the court’s order upholding the panel’s award to ICON of $250,000

in nominal damages. 1 We affirm in part and vacate in part.

      Mr. Holmes was hired by ICON as a wholesaler in 1998 but eventually

became an owner and executive officer in 2003. In 2009, an ICON internal

investigation revealed problems with Mr. Holmes’ management approach, and

ICON decided he should be fired. Mr. Holmes requested that he be allowed to

retire, and ICON agreed. While ICON searched for his replacement, Mr. Holmes

continued to work as ICON Distributors’ interim President and ICON Advisers’

head of sales.

      As a result of his transition to retirement, ICON and Mr. Holmes executed a

Retirement Agreement, which specifically noted that “[i]n any action to enforce,

interpret, or seek damages for violation of this Agreement, the prevailing Party

shall recover all reasonable attorneys’ fees, litigation expenses and costs.” The

Retirement Agreement incorporated by reference a Confidential Information,

Inventions, and Non-Solicitation Agreement, which essentially forbade Mr.

      1
       The arbitration panel awarded other damages to ICON that are not at issue
on appeal.

                                        -2-
Holmes from working with any of ICON’s competitors for two years. The

non-compete agreement also prohibited Mr. Holmes from using any of ICON’s

confidential information.

      In light of a subsequent investigation into the conduct of one of Mr.

Holmes’ subordinates, Mr. Holmes left ICON in March 2010 under a separation

agreement that did not alter the terms of his non-compete agreement. Meeder, a

direct competitor of ICON, hired Mr. Holmes to act as its Senior Vice President

of Sales and Marketing in April 2010. After several attempts by ICON to make

Mr. Holmes comply with the non-compete agreement, the parties agreed to

arbitrate their dispute. All parties to the dispute, including ICON, Meeder, and

Mr. Holmes, signed FINRA Uniform Submission Agreements, stating that each

agreed to be bound by FINRA’s rules, by-laws, and Code of Arbitration

Procedure.

      ICON filed a Statement of Claim, alleging breach of contract against Mr.

Holmes, tortious interference with a contract against Meeder, and interference

with a prospective business relationship against both Mr. Holmes and Meeder.

ICON sought, among other things, damages and attorneys’ fees “pursuant to the

Retirement Agreement and the Non-Compete Agreement . . . .” Aplt. App. at 27.

Mr. Holmes and Meeder filed a Statement of Answer and Counterclaims,

requesting the panel “award Respondents their reasonable attorneys fees, costs

and expenses, forum fees and such further relief as the Panel may deem just and

                                        -3-
proper.” Aplt. App. at 65 (emphasis added). ICON filed an Answer to

Respondents’ Counterclaims, in which it requested “reasonable attorneys fees.”

Aplt. App. at 74. In addition, all the parties submitted affidavits for attorneys’

fees to the panel.

      In March 2012, the FINRA panel found Meeder jointly and severally liable

and awarded ICON damages, including the $250,000 in nominal damages and

$164,170 in attorneys’ fees “pursuant to the terms of the Retirement Agreement”

at issue here. Aplt. App. at 12. Meeder filed a motion to vacate the arbitration

award in the district court, arguing that it was never a party to the Retirement

Agreement and cannot be forced to pay attorneys’ fees based on an agreement to

which it was never a party, that ICON never requested attorneys’ fees from

Meeder, and that there was no support for the award of $250,000 in nominal

damages. The district court confirmed the panel’s award of $250,000 in nominal

damages but vacated the award of $164,170 in attorneys’ fees. It reasoned that

Meeder was “not [a] part[y] to the Retirement Agreement,” that ICON never

requested attorneys’ fees from Meeder “based on the Retirement Agreement,” and

that “attorney fees were payable only by the parties to the agreement.” Aplt.

App. at 71.

      A district court may vacate an arbitration award only “for the reasons

enumerated in the Federal Arbitration Act, 9 U.S.C. § 10, or for ‘a handful of

                                         -4-
judicially created reasons.’” 2 Burlington N. & Santa Fe Ry. Co. v. Pub. Serv. Co.

of Okla., 636 F.3d 562, 567 (10th Cir. 2010) (quoting Sheldon v. Vermonty, 269

F.3d 1202, 1206 (10th Cir. 2001)). These judicially created reasons “include

violations of public policy, manifest disregard of the law, and denial of a

fundamentally fair hearing.” Sheldon, 269 F.3d at 1206. “In reviewing a district

court order vacating an arbitration award, we review factual findings for clear

error and legal determinations de novo.” Hollern, 458 F.3d at 1172. But we

“give extreme deference to the determination of the arbitration panel for the

standard of review of arbitral awards is among the narrowest known to law.” Id.

(internal quotation marks and citation omitted). This narrow standard “has been

interpreted to mean that ‘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.’”

Int’l Bhd. of Elec. Workers, Local Union No. 611, AFL-CIO v. Pub. Serv. Co. of

N.M., 980 F.2d 616, 618 (10th Cir. 1992) (quoting United Paperworkers Int’l

      2
        Section 10 of the Federal Arbitration Act allows a district court to vacate
an arbitration award if: (1) “the award was procured by corruption, fraud, or
undue means”; (2) “there was evident partiality or corruption in the arbitrators”;
(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.” 9 U.S.C. § 10.

                                         -5-
Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987)). “Once an arbitration

award is entered, the finality of arbitration weighs heavily in its favor and cannot

be upset except under exceptional circumstances.” Burlington, 636 F.3d at 567

(internal quotation marks and citation omitted).

      On appeal, Meeder again contends ICON never requested attorneys’ fees

from Meeder “pursuant to the Retirement Agreement or otherwise,” Aple. Br. at

17 (emphasis in original), and therefore the issue was never submitted to the

panel. Meeder also argues that because it was never a party to the Retirement

Agreement, it cannot be bound by the panel’s decision to award attorneys’ fees

based on that agreement. We disagree.

      FINRA guidelines expressly allow a panel to award attorneys’ fees when

“all of the parties request or agree to such fees.” Aplt. App. at 55 (emphasis

added). A submission agreement is considered to be a contract between the

parties, which gives an arbitration panel authority to act. See Hollern v.

Wachovia Sec., Inc., 458 F.3d 1169, 1174 (10th Cir. 2006) (“[I]ncorporating a

document by reference into a contract makes that document an express part of the

contract.” (citing Plunkett v. Plunkett, 624 S.E.2d 39, 42 (Va. 2006))).

“Arbitrators derive their authority from the parties’ arbitration agreement,” and

“parties may extend that authority . . . in their submissions to the arbitrators so

long as the submissions do not violate an express provision of the original

arbitration agreement.” Id.

                                          -6-
      All parties to the dispute filed Submission Agreements, in which they each

agreed to submit the “matter in controversy, as set forth in the attached statement

of claim, answers, and all related cross claims, counterclaims and/or third-party

claims which may be asserted, to arbitration in accordance with the FINRA By-

Laws, Rules, and Code of Arbitration Procedure.” Aplt. App. at 45-53. The

agreements state that each party “agree[s] to abide by and perform any award(s)

rendered pursuant to this Submission Agreement.” Id. Both ICON and Meeder

specifically requested attorneys’ fees: ICON in its Statement of Claim and

Answer to Respondents’ Counterclaims, and Meeder in its Statement of Answer

and Counterclaims. Where, as here, parties incorporate by reference their

Statement of Claim and Answer, which both contain requests for attorneys’ fees,

into a Uniform Submission Agreement that states they agree “to submit all issues

identified in those pleadings to arbitration, . . . the parties expressly empower[]

the arbitrators to award attorneys’ fees.” Hollern, 458 F.3d at 1174.

      Thus, the issue of attorneys’ fees was submitted to the panel by agreement

of the parties and the FINRA guidelines clearly gave the panel authority to rule

on and award such fees. Meeder’s argument that ICON never requested

attorneys’ fees is contradicted by the record. Moreover, “[i]t is the arbitrator’s

construction which was bargained for; and so far as the arbitrator’s decision

concerns construction of the contract, the courts have no business overruling him

because their interpretation of the contract is different from his.” United

                                          -7-
Steelworkers of Am. v. Enter. Wheel & Car Corp., 363 U.S. 593, 599 (1960).

      Even assuming the panel erred in awarding attorneys’ fees based

specifically on the Retirement Agreement, we are not at liberty to overturn that

decision. In line with the deferential standard of review, we have recognized that

“[e]rrors in an arbitration panel’s factual findings, or its interpretation and

application of the law, do not justify vacating an award.” Hollern, 458 F.3d at

1172. Because the arbitration panel had general authority pursuant to the

Submission Agreements to award attorneys’ fees, an erroneous reference to the

Retirement Agreement as a basis for its award was merely an error of fact, which

does not justify overturning the panel’s award of attorneys’ fees. We therefore

hold the district court erred in vacating the award of attorneys’ fees to ICON.

      Meeder also appeals the district court’s order upholding the panel’s award

of $250,000 in nominal damages to ICON. It contends that “[a]warding damages

on a claim never submitted to the Panel clearly exceeded the authority of the

Panel as set forth in the Submission Agreement[s].” Aple. Br. at 28. The district

court held the nominal damages award was “ambiguous,” stating:

      [O]ne possible interpretation is that the award is a general,
      undifferentiated award on the claims for tortious interference with
      existing and prospective business relationships, which general award
      is then followed by specific awards on each of those claims. If so
      construed, the award is within the purview of the authority granted
      by the parties to the Panel.

Aplt. App. at 71.

                                          -8-
      Whether or not we agree, “we are mindful of the strong presumption

requiring all doubts concerning whether a matter is within the arbitrators’ powers

to be resolved in favor of arbitrability.” Hollern, 458 F.3d at 1173. Accordingly,

we affirm the district court’s order upholding the panel’s award of nominal

damages to ICON. 3

      In sum, we REVERSE the district court’s order vacating the panel’s award

to ICON of $164,170 in attorneys’ fees, and AFFIRM the district court’s order

upholding the panel’s award to ICON of $250,000 in nominal damages.

                                      ENTERED FOR THE COURT

                                      Stephanie K. Seymour
                                      Circuit Judge

      3
          ICON has also filed a Motion for Attorneys’ Fees. We deny ICON’s
motion.

                                        -9-