Court Opinion

ID: 3001335
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:15:35.03592+00
Date Added: 2024-06-11T12:46:25.951898
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 07-1615
CAMEEL A. HALIM,
                                             Plaintiff-Appellant,
                                v.

GREAT GATSBY’S AUCTION GALLERY, INCORPORATED,
                                            Defendant-Appellee.
                         ____________
           Appeal from the United States District Court
      for the Northern District of Illinois, Eastern Division.
           No. 03 C 8414—Charles P. Kocoras, Judge.
                         ____________
ARGUED NOVEMBER 30, 2007—DECIDED FEBRUARY 14, 2008
                  ____________

 Before BAUER, RIPPLE, and KANNE, Circuit Judges.
  BAUER, Circuit Judge. Plaintiff-Appellant Cameel A.
Halim appeals various actions taken by the district court
in his civil lawsuit against Defendant-Appellee Great
Gatsby’s Auction Gallery, Incorporated (“Gatsby”). For
the reasons herein, we affirm the rulings of the district
court, but decline to review its imposition of sanctions on
Halim’s counsel at the district court on jurisdictional
grounds.

                       I. Background
  On October 9, 2003, Halim, an Illinois resident and
antique timepiece collector, initially filed a complaint
2                                               No. 07-1615

against Gatsby in Illinois state court, alleging that items
he purchased at a Gatsby auction did not match the
descriptions in the auction item catalog. Halim partici-
pated in the auction via telephone and did not see or
inspect any of the items before bidding on them. Halim
sued for breach of warranty, misrepresentation, novation,
and rescission. Gatsby removed the case to federal court
under diversity jurisdiction on November 21, 2003, and
filed a motion to dismiss the complaint on December 19,
2003 on the grounds that a binding arbitration clause
existed in the auction agreement.1 On March 5, 2004,
the district court ruled that Gatsby had successfully
invoked the contract’s binding arbitration clause. Pursuant
to that holding, the district court stayed the case and
ordered the parties to arbitration.
  Halim filed an arbitration demand with the American
Arbitration Association (“AAA”) in March of 2005. At
the start of the arbitration, the arbitrator sent both
parties a letter that confirmed various dates and dead-
lines. The letter also stated that at the conclusion of the
arbitration, the arbitrator would issue an award includ-
ing “findings of fact and conclusions of law.”
  During extensive and contentious discovery, Halim
requested copies of invoices for all other purchases from
the same Gatsby auction, claiming they were relevant to
prove that Gatsby’s auction was not “without reserve” as
he claimed it had been advertised. Gatsby refused to
produce these records on the basis that they were irrele-
vant to the claims brought by Halim because the items
Halim bid on were not without reserve. Halim requested a
formal ruling on the discovery dispute from the arbitrator.
Having already admonished the parties for their failure to

1
  Gatsby moved to dismiss the complaint on several additional
grounds, none of which are relevant to this appeal.
No. 07-1615                                               3

cooperate with each other’s discovery requests in a written
order dated January 23, 2006, the arbitrator declined to
issue a formal ruling. Instead, the arbitrator directed the
parties to abide by his January 23, 2006 order instructing
the parties to immediately review discovery requests
and make a good faith effort to satisfy those requests so
that the evidentiary hearing could go forward as sched-
uled. The evidentiary hearing had already been continued,
and as the arbitrator wrote in his January 23, 2006 order:
“[B]oth sides have lost sight of the fact that this is an
arbitration and meant to be a cost effective and efficient
process to be completed in an expeditious manner. It is
inappropriate for me to micromanage a laborious and
tedious discovery process as if this were a litigated case
in court.”
  The case proceeded to a final arbitration hearing, and
on September 15, 2006, the arbitrator issued a ruling
denying Halim’s claims in their entirety. In his ruling, the
arbitrator explained the factual circumstances giving
rise to Halim’s claims, and then proceeded to address
Halim’s claims in turn. The arbitrator made the follow-
ing statements in his analysis of Halim’s claims:
    •   “[T]hese disclaimer documents are valid, enforce-
        able, and applicable in this case.”
    •   “The burden was on claimant to overcome the
        obligations he imposed on himself by participating
        in the auction under the terms and conditions
        of this sale.”
    •   “[Halim] is bound by the conditions of his partici-
        pation and has shown no legal or factual basis
        for recovery in this proceedings.”
    •   “[P]roven fraud could overcome these disclaimer
        bars to recovery. However, there was no credible
        evidence of fraud, antecedent or otherwise, that
        would afford claimant any relief in this case.”
4                                              No. 07-1615

    •   “[C]laimant’s failure to conduct any due diligence
        is fatal to a recovery by him on any applicable
        theory claimed by him in the case.”
    •   “It is doubtful that the Illinois Consumer Fraud
        and Deceptive Practice Act applies to this case
        but, if it does, the evidence fails to show a viola-
        tion of the Act by respondent.”
    •   “Claimant’s assertion of a novation here is not
        supported by the evidence and must also fail as
        a basis for recovery.”
    •   “[A]ny damages claimant has sustained resulted
        from claimant’s own failure to exercise ordinary
        diligence. . .”
    •   “[T]he law and evidence do not afford [Halim] any
        legal relief in this case.”
   The case then returned to the federal district court,
where, on December 5, 2006, Halim filed a motion to
vacate the arbitration award. Halim argued that the
arbitrator failed to rule on the discovery dispute regard-
ing Gatsby’s invoices for other purchases from the auc-
tion and failed to issue an opinion containing findings of
fact and conclusions of law. On January 10, 2007, Gatsby
filed a motion to confirm the arbitration award, and
shortly thereafter, sent Halim a Rule 11 letter inform-
ing him that Gatsby would seek sanctions if Halim did not
withdraw his frivolous motion to vacate. Halim declined
to withdraw his motion, and on February 6, 2007, Gatsby
moved for Rule 11 sanctions.
   On February 15, 2007, the district court denied Halim’s
motion to vacate and granted Gatsby’s motion to con-
firm the arbitration award. The district court determined
that Halim failed to present any meritorious objection to
the arbitrator’s award; rather, Halim simply disagreed
with the arbitrator’s decision. On March 12, 2007, the
No. 07-1615                                                5

district court granted Gatsby’s motion for Rule 11 sanc-
tions, and ordered Halim’s attorney to pay $7,187.50.

                     II. Discussion
  Halim appeals (1) the district court’s decision to stay the
proceedings pending arbitration; (2) the district court’s
confirmation of the arbitration award; and (3) the dis-
trict court’s imposition of Rule 11 sanctions.

  A. Stay of Proceedings Pending Arbitration
  Halim’s first argument on appeal is that the district
court improperly treated Gatsby’s motion to dismiss as a
motion to stay. Gatsby sought to dismiss Halim’s com-
plaint on the basis of a binding arbitration clause in the
auction agreement. The district court, finding that Gatsby
had properly invoked the arbitration clause, stayed the
case pending arbitration.
  Halim’s argument is without merit. As this Court has
noted on numerous occasions, “the proper course of action
when a party seeks to invoke an arbitration clause is to
stay the proceedings rather than to dismiss outright.” E.g.,
Cont’l Cas. Co. v. Am. Nat’l Ins. Co., 417 F.3d 727, 732 n.7
(7th Cir. 2005) (citing Tice v. Am. Airlines, Inc., 288 F.3d
313, 318 (7th Cir. 2002)). It is undisputed that one of the
grounds on which Gatsby sought to dismiss Halim’s
complaint was the arbitration clause. By seeking dismissal
of the complaint based on a binding arbitration clause in
the auction agreement, Gatsby successfully invoked the
arbitration clause and the court properly stayed the
proceedings.
  In his challenge to the district court’s stay of the case,
Halim also asserts that the district judge erred in find-
ing that Gatsby had not waived its right to arbitrate
6                                               No. 07-1615

the dispute. Halim contends that Gatsby’s decisions to
remove the case to federal court first and then to seek
dismissal of the case “on the merits” constituted an
implicit waiver of Gatsby’s right to arbitrate.
  Factual determinations on which a district court predi-
cates a finding of waiver are reviewed for clear error, while
legal questions of whether a party’s conduct amounts to
waiver are reviewed de novo. Ernst & Young LLP v. Baker
O’Neal Holdings, Inc., 304 F.3d 753, 756 (7th Cir. 2002).
A party may waive a contractual right to arbitrate ex-
pressly or implicitly. Sharif v. Wellness Int’l Network,
Ltd., 376 F.3d 720, 726 (7th Cir. 2004). Courts must
“determine whether based on all the circumstances, the
party against whom the waiver is to be enforced has acted
inconsistently with the right to arbitrate.” Id. (quoting
Ernst & Young, 304 F.3d at 757). Although a variety of
factors may be considered, diligence or a lack thereof
should weigh heavily in the court’s determination of
whether a party implicitly waived its right to arbitrate.
Id. A party does not waive its right to arbitrate a dispute
by filing a motion to dismiss or a motion to transfer
venue. Id. at 726-27.
  Halim relies on Cabintree of Wis., Inc. v. Kraftmaid
Cabinetry, Inc., 50 F.3d 388 (7th Cir. 1995), for his position
that Gatsby waived its right to arbitrate by removing
the case to federal court and then filing a motion to
dismiss, thereby asking the district court to “rule on the
merits of the case.” In Cabintree, the plaintiffs filed
suit in state court and the defendant removed the case
to federal court based on diversity of citizenship. 50 F.3d
at 389. After participating in pretrial activities for six
months, including receiving over two thousand documents
in discovery, the defendant moved to stay the action
pending arbitration just five months before trial. Id. at
390-91. Based on the Cabintree defendant’s combined
No. 07-1615                                                7

actions, this Court held that the defendant had im-
plicitly waived its right to arbitrate the dispute. See id.;
see also Sharif, 376 F.3d at 727 (noting the failure by
the Cabintree defendant to make a reasonable deter-
mination to proceed in arbitration rather than in litiga-
tion); Ernst & Young, 304 F.3d at 757 (explaining how
the Cabintree defendant’s participation in adversary
proceedings in litigation was a manifestation of intent
to forego arbitration).
   This Court has explicitly held that simply moving to
dismiss a case does not waive one’s right to arbitrate. E.g.,
Sharif, 376 F.3d at 726-27 (holding that a motion to
dismiss or transfer venue does not constitute waiver of
one’s right to arbitrate). Moreover, although this Court has
considered removal in determining whether there was
implicit waiver of an arbitration clause, it has not found
waiver where removal was the only action taken by the
party against whom the waiver was to be enforced. See,
e.g., Cabintree, 50 F.3d at 390-91 (finding removal and
participation in several months of litigation to be incon-
sistent with intent to arbitrate); Grumhaus v. Comerica
Sec., Inc., 223 F.3d 648, 651 (7th Cir. 2000) (finding
filing of complaint in state court, and then waiting more
than a year to demand arbitration after state court
dismissal to be inconsistent with intent to arbitrate).
  Here, Gatsby removed the case to federal court ap-
proximately six weeks after Halim filed the complaint.
Within thirty days of removal and before any other
pleadings were filed in the case, Gatsby sought to dis-
miss the case by invoking the arbitration clause. By doing
so, Gatsby asserted its intent to resolve the dispute in
arbitration and not litigation. Gatsby did not participate in
any pretrial activities prior to invoking the arbitra-
tion clause, nor did Gatsby unreasonably delay its arbitra-
tion demand. Absent any other action, removal alone did
8                                              No. 07-1615

not amount to implicit waiver of its right to arbitrate.
We find that the district court properly found that Gatsby
did not waive its right to arbitrate and therefore prop-
erly stayed the case pending arbitration.

    B. Confirmation of the Arbitration Award
  Next, Halim argues that the district court erred by
confirming the arbitration award because the arbitrator
“manifestly disregarded the law” by declining to formally
rule on a discovery dispute and by failing to issue an
award containing “findings of fact and conclusions of law.”
Halim claims that both of these errors were in excess
of the arbitrator’s powers and therefore violated the
Federal Arbitration Act (“FAA”), 9 U.S.C. § 10(a)(4).
  The grounds for overturning an arbitration award are
extremely limited. See Wise v. Wachovia Sec., LLC, 450
F.3d 265, 268-69 (7th Cir. 2006); IDS Life Ins. Co. v.
Royal Alliance Associates, Inc., 266 F.3d 645, 649 (7th Cir.
2001). This Court has limited the “manifest disregard of
the law” standard for purposes of 9 U.S.C. § 10(a)(4) to
encompass only two scenarios: (1) an order requiring the
parties to violate the law; or (2) an order that does not
adhere to the legal principles specified by the contract.
George Watts & Son, Inc. v. Tiffany and Co., 248 F.3d 577,
581 (7th Cir. 2001). Factual or legal error, no matter how
gross, is insufficient to support overturning an arbitra-
tion award. IDS Life Ins. Co., 266 F.3d at 650.
  Halim first contends that the arbitrator’s refusal to
formally rule on a discovery dispute concerning the
production of copies of all invoices for the auction war-
rants vacatur of the arbitrator’s award. We disagree.
Keeping in mind the goal of resolving disputes in an
expeditious and cost-effective manner, the arbitrator
directed the parties’ attention to his January 23, 2006
No. 07-1615                                                9

order instructing the parties to complete discovery in
good faith and without micromanagement. This instruc-
tion was in compliance with the AAA rules governing
discovery. Rule L-4 of the AAA permits the arbitrator to
“take such steps as [he] may deem necessary or desirable
to avoid delay and to achieve a just, speedy and cost
effective resolution.” Accord George Watts & Son, Inc., 248
F.3d at 580 (“[J]udges may not deprive arbitrators of
authority to reach compromise outcomes that legal norms
leave within the discretion of the parties to the arbitration
agreement.”); see also Ganton Techs., Inc. v. Int’l Union,
United Auto., Aerospace & Agric. Implement Workers of
Am., U.A.W., Local 627, 358 F.3d 459, 462 (7th Cir. 2004)
(reiterating the need for arbitration to be efficient and
cost-effective resolution of disputes); Major League Um-
pires Ass’n v. Am. League of Prof ’l Baseball Clubs, 357
F.3d 272, 289 (3d Cir. 2004) (noting that limited judicial
review of arbitrator’s decisions is necessary to uphold
the federal policy in favor of arbitration and to avoid long
and expensive litigation proceedings). The arbitrator’s
decision not to rule on the additional discovery disputes
and instead to remind the parties of their mutual contrac-
tual obligations to cooperate in discovery was an attempt
by the arbitrator to give the parties what they had con-
tracted for: a cost-effective and efficient resolution of
their dispute. See George Watts & Son, Inc., 248 F.3d at
578. The arbitrator’s failure to formally rule on that
particular discovery dispute was a far cry from a “manifest
disregard of the law.”
   Halim also argues that the arbitrator manifestly dis-
regarded the law by failing to issue an award containing
“findings of fact and conclusions of law,” as agreed upon by
the parties. Halim cites dicta (a hypothetical, no less) from
George Watts & Son, Inc. for the proposition that an
arbitrator’s lack of sufficient reasoning in his award is
comparable to an arbitrator’s decision to apply the law of
10                                             No. 07-1615

a state other than the state law applicable under the
arbitration agreement. See 248 F.3d at 579 (hypothesizing
that if an arbitration agreement specifies that a dispute
is to be resolved under Wisconsin law, and the arbitrator
declares that he prefers New York law, or no law at all,
vacatur of the award under § 10(a)(4) would be warranted).
Halim’s comparison is absurd. An arbitral order that does
not adhere to the legal principles specified by the arbitra-
tion agreement is one of two scenarios that warrants
vacutur of the arbitral award pursuant to § 10(a)(4).
George Watts & Son, Inc., 248 F.3d at 581. Ignoring a
choice of law provision in an arbitration agreement
exceeds the arbitrator’s power since the arbitrator’s
power is borne from that arbitration agreement. In this
case, the arbitrator did not exceed his power by not
explaining his award in greater detail. In other words, the
arbitrator did not exceed his power by not doing enough.
  As the excerpts from the award illustrate, the arbitrator
did indeed provide an award containing findings of fact
and conclusions of law; unfortunately for Halim, they
were not the findings of fact or conclusions of law he
desired. We have been clear that a party may not “use
issues of the arbitrator’s authority as a ruse to obtain
judicial review on the merits of an arbitral award.” Flender
Corp. v. Techna-Quip Co., 953 F.2d 273, 278 (7th Cir.
1992) (quotation omitted). In our opinion, Halim sought
review of the arbitrator’s authority without a meritorious
ground to do so. The district court properly confirmed
the arbitrator’s award.

  C. Imposition of Rule 11 Sanctions
  Finally, Halim appeals the Rule 11 sanctions imposed on
his former attorney, Alan M. Didesch, by the district court.
However, we lack jurisdiction to review the sanctions.
Didesch failed to file a notice of appeal on his own behalf.
No. 07-1615                                               11

While Halim’s notice of appeal mentions Halim’s intent
to appeal the district court’s March 12, 2007 order grant-
ing sanctions, Halim lacks standing to appeal sanctions
imposed on Didesch. See FED. R. APP. P. 3(c)(2) (“A pro se
notice of appeal is considered filed on behalf of the signer
and the signer’s spouse and minor children (if they are
parties), unless the notice clearly indicates otherwise.”);
see also Reed v. Great Lakes Companies, Inc., 330 F.3d 931,
933 (7th Cir. 2003) (where a notice of appeal did not
list counsel in caption of appeal nor did it mention sanc-
tions in body of notice of appeal, this court lacked jurisdic-
tion); compare Retail Flooring Dealers of Am., Inc. v.
Beaulieu of Am., 339 F.3d 1146, 1149 (9th Cir. 2003)
(notice of appeal was adequate because attorney signed
the notice of appeal which mentioned intent to appeal
applicable sanctions and sanctioned attorney argued for
reversal of sanctions); Laurino v. Tate, 220 F.3d 1213, 1218
(10th Cir. 2000) (same). Because Didesch took no part in
filing the notice of appeal or the appeal thereafter, we
cannot find any plausible indication of his intention
to challenge the sanctions imposed on him. We therefore
lack jurisdiction over any challenge to the Rule 11 sanc-
tions imposed.

                     III. Conclusion
  For the foregoing reasons, we AFFIRM.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—2-14-08