Court Opinion

ID: 4148864
Source: CourtListenerOpinion
Date Created: 2017-02-28 17:01:17.941567+00
Date Added: 2024-06-11T14:45:52.141539
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 17a0132n.06

                                      Case No. 15-6322

                         UNITED STATES COURT OF APPEALS
                              FOR THE SIXTH CIRCUIT

                                                                                 FILED
                                                                           Feb 28, 2017
TALLAKOY, LP; TALLAWAH, INC.; AKOYA                  )                 DEBORAH S. HUNT, Clerk
GROUP, LTD.; JASON BEDASSE; GARTH                    )
MYERS; TALLAKOY GP, INC.,                            )
                                                     )       ON APPEAL FROM THE
       Plaintiffs-Appellees,                         )       UNITED STATES DISTRICT
                                                     )       COURT FOR THE EASTERN
v.                                                   )       DISTRICT OF KENTUCKY
                                                     )
BLACK FIRE ENERGY, INC.; BLACK FIRE                  )
MINING, LLC; GILL STEVEN BROWN,                      )
                                                     )                            OPINION
       Defendants-Appellants,                        )

BEFORE:       COLE, Chief Judge; DAUGHTREY and MOORE, Circuit Judges.

       COLE, Chief Judge.       The parties entered into a Revenue Participation Agreement

(“RPA”) in which they agreed that any disputes arising from that contract would be resolved

through an arbitration proceeding.     Plaintiffs-Appellees Tallakoy LP; Tallakoy GP, Inc.;

Tallawah, Inc.; Akoya Group, Ltd.; Jason Bedasse; and Garth Myers filed a complaint on

December 23, 2014, seeking to enforce an award they obtained in an arbitration proceeding.

Defendants-Appellants Black Fire Energy, Inc.; Black Fire Mining, LLC; and Gill Steven

Brown, (collectively, “Defendants” or “Black Fire”), filed a motion to dismiss the complaint on

the ground that the award was invalid and unenforceable. The district court construed the motion

to dismiss as a motion to vacate the award and denied the motion as untimely. Black Fire
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

thereafter filed a motion under Federal Rule of Civil Procedure 59(e) to vacate the judgment and

under Rule 60(b) for relief from the judgment. The district court denied both motions. We

reverse and remand for further proceedings consistent with this opinion.

                                       I. BACKGROUND

       A. The Parties Form a Contract

       Tallakoy LP; Tallakoy GP, Inc.; Tallawah, Inc.; and Akoya Group, Ltd., (collectively,

“Plaintiffs” or “Tallakoy”), are investment companies. Jason Bedesse and Garth Myers are

principals and operators of Tallakoy. In May 2012, Tallakoy invested in a mining operation in

Pike County, Kentucky, known as Heller Mine. Tallakoy purportedly made the investment

based on its review of promotional materials distributed by Black Fire. Nicholas Stodin, as

signatory for Black Fire Energy, Inc., and Bedasse and Myers, as signatories for Tallakoy,

entered into the RPA. The RPA included an arbitration clause in § 7.2:

       Any dispute arising from this Agreement that cannot be resolved by the Parties
       themselves shall be settled by binding arbitration by an agreed upon arbitrator or,
       alternatively, by a panel of three arbitrators in the event the parties are unable to
       agree on one arbitrator. The arbitration will be conducted in Kentucky in
       accordance with the rules of the American Arbitration Association. Any
       judgment rendered by arbitration shall be considered as final and binding and may
       be entered into the Kentucky courts having jurisdiction.

(Tallakoy II RPA, R. 13-3, PageID 167.)

       B. Tallakoy I

       In June 2013, Tallakoy sued Black Fire, “seeking compensatory, liquidated and punitive

damages, as well as injunctive relief.” (Tallakoy I Compl., R. 1, PageID 5−6.) Tallakoy alleged

that Black Fire “induce[d] [Tallakoy] to invest nearly $1,000,000 into a sham eastern Kentucky

mining operation [Heller Mine], owned and operated by [Black Fire, which] . . . then misapplied

the investor funds to other operations and for [Black Fire’s] own personal enrichment.” (Id.)

Black Fire moved to dismiss the complaint on the ground that RPA § 7.2 required the dispute to
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

be resolved by arbitration. On October 29, 2013, the district court granted Black Fire’s motion,

thereby dismissing Tallakoy I for lack of subject matter jurisdiction. The court directed the

parties to arbitrate the dispute under the RPA.

       Sometime thereafter, Tallakoy engaged a single arbitrator who conducted an arbitration

proceeding concerning the parties’ dispute without the participation or involvement of Black

Fire. The arbitrator issued an award (“the Award”) in Tallakoy’s favor on September 23, 2014.

       On October 24, 2014, Tallakoy filed a motion in Tallakoy I to enforce the Award. Stodin

claimed that he, and hence Black Fire, first learned of the arbitration proceeding and the Award

on October 27, 2014. Stodin says he contacted the American Arbitration Association (“AAA”)

to determine whether it had any record of an arbitration between Tallakoy and Black Fire, given

that the RPA required any arbitration to be conducted in accordance with the rules of the AAA.

On November 21, 2014, Stodin, through his agent, filed a notice in the district court stating that

the AAA had no record of an arbitration proceeding between Black Fire and Tallakoy.

       On December 19, 2014, the district court denied Tallakoy’s motion to enforce the Award,

noting it no longer had jurisdiction over the dispute because the case had been administratively

closed. The court suggested that Tallakoy file a new complaint and seek enforcement of the

Award in that case.

       C. Tallakoy II

       Apparently in furtherance of the district court’s suggestion, Tallakoy filed a complaint,

with the Award attached, to enforce the Award on December 23, 2014. On March 4, 2015,

Black Fire moved to dismiss the complaint, arguing that “the award that Plaintiffs seek to

enforce was knowingly obtained in direct violation of the Parties’ arbitration agreement, and

therefore is invalid and unenforceable.” (Tallakoy II Mot. to Dismiss, R. 13-1, PageID 107.)
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

The district court denied Black Fire’s motion, which it construed as a motion to vacate, finding

“[w]hatever the merits of Black Fire’s allegations, they come too late.” (Tallakoy II Order,

R. 21, PageID 235.) Black Fire then moved to alter or amend the decision and to vacate the

judgment under Rules 59(e) and 60(b) on the basis that the district court erred in its

determination of the date by which Black Fire had to challenge the Award. Black Fire also

argued that the Award is invalid because it violates the terms of the RPA, the court’s order to

arbitrate in Tallakoy I, the AAA rules, and the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–

16. The district court denied that motion on October 22, 2015.

       This appeal followed.

                                          II. ANALYSIS

       A. Standard of Review

       Black Fire appeals the district court’s denial of its motions under Rules 59(e) and 60(b).

We review the denial of a Rule 59(e) motion for abuse of discretion, reversing only when the

district court (1) relies on clearly erroneous findings of fact, (2) improperly applies the law, or

(3) uses an erroneous legal standard. Nolfi v. Ohio Ky. Oil Corp., 675 F.3d 538, 552 (6th Cir.

2012); Intera Corp. v. Henderson, 428 F.3d 605, 619–20 (6th Cir. 2005). A Rule 60(b) motion

allows the court to “relieve a party or its legal representative from a final judgment, order, or

proceeding” in cases where there has been

       (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered
       evidence that, with reasonable diligence, could not have been discovered in time
       to move for a new trial under Rule 59(b); (3) fraud (whether previously called
       intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;
       (4) the judgment is void; (5) the judgment has been satisfied, released, or
       discharged; it is based on an earlier judgment that has been reversed or vacated; or
       applying it prospectively is no longer equitable; or (6) any other reason that
       justifies relief.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

Fed. R. Civ. P. 60(b). “We review the district court’s decision on a Rule 60(b) motion under the

same [abuse of discretion] standard.” Burrell v. Henderson, 434 F.3d 826, 831 (6th Cir. 2006).

        B. Timeliness

        The FAA requires a party to challenge an arbitration award “within three months after the

award is filed or delivered.” FAA § 12. The FAA does not define “filed” or “delivered.”

However, the AAA Rules, which the parties agreed to follow in their RPA, provide that:

        Parties shall accept as notice and delivery of the award the placing of the award or
        a true copy thereof in the mail addressed to the parties or their representatives at
        their last known addresses, personal or electronic service of the award, or the
        filing of the award in any other manner that is permitted by law.

Am.     Arb.   Ass’n     Com.     Arb.   R.    &      Mediation   Proc.   R.   49,   available    at

https://www.adr.org/aaa/faces/rules/searchrules/rulesdetail?doc=ADRSTG_004130           (“AAA R.

49”).

        Tallakoy argues that there are six possible dates for when the Award was “filed or

delivered,” all of which would make Black Fire’s March 4, 2015 challenge untimely, assuming

Black Fire first challenged the Award in the motion to dismiss filed on that date. Black Fire

argues that December 23, 2014, when Tallakoy filed its complaint in Tallakoy II and attached a

copy of the Award, constitutes the “start date” under the FAA and the AAA rules and thus is the

appropriate date to begin Black Fire’s three months to contest the Award. If Black Fire is

correct, its March 4, 2015 challenge to the Award was timely filed.

        We first address the three dates considered by the district court and then address the other

dates proposed by Tallakoy.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

               i. September 23, 2014

                       1. Filing

       The district court determined that Black Fire’s time to challenge the Award actually

began to run on September 23, 2014, when the arbitrator issued the Award. The district court

reasoned that FAA § 12’s reference to “filed” means the date on which the Award was issued.

Thus, in the district court’s view, the Award was filed on the date it was issued. As noted, the

FAA does not define what it means for an arbitration award to be filed or delivered.

       The district court’s determination that “filed” means “issued” does not comport with the

plain language of FAA § 12. If “filed” always means “issued,” then the phrase “or delivered”

would be superfluous because an award would always be “filed” immediately upon issuance and

there would be no need for “delivery.” See Bennett v. Spear, 520 U.S. 154, 173 (1997) (“It is the

cardinal principle of statutory construction that it is our duty to give effect, if possible, to every

clause and word of a statute rather than to emasculate an entire section.”) (internal quotation

marks and alterations omitted); see also Eagle Energy, Inc. v. Dist. 17, United Mine Workers of

Am., 177 F.R.D. 357, 358 (S.D.W.Va. 1998) (“Nor would we be justified in excising ‘delivered’

from the statute.”). If Congress meant for the three-month period to commence once an award is

issued, it knew how to say that. See Bennett, 520 U.S. at 173. Therefore, it runs counter to

principles of statutory interpretation to find that the issuance date, when there is no other

evidence of filing, is automatically the date on which the award was filed.

       The district court relied on three cases to support the proposition that “filed” always

means “issued.” However, these cases do not change the statutory legal analysis. None of them

analyze the definition of “filed” or explain why the court should consider the date of issuance as

the date of filing. In re Robinson, the only precedent from this court cited by the district court,
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

devotes only two sentences to this issue. 326 F.3d 767, 772 (6th Cir. 2003). Robinson found

that “[t]he arbitration award appears to have been entered on June 18, 1999, and to have become

final fifteen days later, while Robinson’s objection was not filed until February 11, 2000.

Therefore, Robinson did not meet the three month deadline set forth in FAA § 12.”

Robinson did not identify which date it used. Rather it found that the period before the motion to

vacate was filed was so long that the motion could not have been timely. The court did not

analyze the significance of the issuance date or what filing meant. Therefore, Robinson does not

support the conclusion that we should automatically consider the issuance date as the filing date.

       The district court relies on two other cases, one from the Fourth Circuit and another from

the District of Maryland, in its determination that an arbitration award is filed when issued. In

Taylor v. Nelson, the Fourth Circuit used the date of issuance as the date it considered an award

to have been filed. 788 F.2d 220, 225 (4th Cir. 1986). The court did not directly address why

the issuance date should mean filing date and instead focused on reasons the three-month period

should not run from the date of a motion for confirmation of the award.

       Similarly, the district court relies on a case from the District of Maryland that found that

the filing date was the issuance date. However, the court’s inquiry in that case was focused on

when a decision is considered final rather than whether issuance of an award is synonymous with

filing under the FAA.      Parsons, Brinckerhoff, Quade & Douglas, Inc. v. Palmetto Bridge

Constructors, 647 F. Supp. 2d 587, 593 (D. Md. 2009).

       There are at least two circuits that have not followed the Fourth Circuit’s view. The

Seventh Circuit determined that the issuance date was the filing date but only because the

opposing party had not argued that the award was improperly filed or delivered on that date,

“and the record would not support such an allegation.” Olson v. Wexford Clearing Servs. Corp.,
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

397 F.3d 488, 492 (7th Cir. 2005). The Seventh Circuit’s analysis indicates that where the

issuance date happens to be the same as the filing or delivery date, the three-month period to

challenge the award may begin on that date.           However, the operative act to trigger this

three-month period is the filing or delivery of the award, not the issuance alone. Further, the

District of Columbia Circuit used the delivery date rather than the issuance date when

determining when the three-month period began.           See Sargent v. Paine Webber Jackson

& Curtis, Inc., 882 F.2d 529, 531 (DC Cir. 1989).

       Other courts have disagreed with the district court’s determination that the date of

issuance constitutes the date of filing. See, e.g., Adcock v. Halliburton Energy Servs., Inc.,

No. CIV.A. 2:04-CV-284BR, 2007 WL 496729, at *2 (S.D. Miss. Feb. 13, 2007) (refusing to use

issuance date of an arbitration award as starting time to determine whether a motion to vacate

was timely where Fifth Circuit had not ruled on the issue); White v. Local 46 Metallic Lathers

Union & Reinforcing Iron Workers of N.Y. City, No. 01CIV.8277, 2003 WL 470337, at *4

(S.D.N.Y. Feb. 24, 2003) (stating issuance date, filing date, and delivery date separately, and

using the delivery date to determine timeliness of a motion to vacate).

       Here, the record reflects that the Award includes the signature of the arbitrator and a date

of September 23, 2014, but there is no evidence that the arbitrator “filed” the Award or attempted

to “deliver” it to Black Fire by any means on that date or any other date. Assuming that the

Award was “issued” on September 23, 2014, there is no evidence that it was filed or delivered on

that date, which is a requirement under the FAA.

                       2. Delivery

       The district court alternatively found that September 23, 2014, was the date the Award

was delivered.     Though Tallakoy asserted that “[t]he Arbitrator issued an award against
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

Defendants and sent it to the parties pursuant to AAA Rule 49,” it adduced no evidence of

delivery and no such evidence appears in the record.

       The finding that September 23, 2014, was the date the Award was delivered on the record

before us is a clearly erroneous finding of fact because it wrongly assumes that because Tallakoy

had received the arbitration award, the arbitrator (1) mailed the award to both parties and (2) that

he mailed the award on September 23, 2014. There is no evidence in the record to support these

assumptions. The lack of evidence is especially concerning in a case like this one where one

party was absent from the arbitration proceeding, and possibly was not mailed a copy of the

Award for that very reason.

       It does appear that the district court is correct that the date an arbitration award is placed

in the mail can be considered the date of delivery under AAA Rule 49, but the record does not

support that the arbitrator mailed the Award to Black Fire on September 23, 2014. The district

court’s factual finding that September 23, 2014 was the date of delivery is in error, at least on the

record developed thus far.

               ii. October 24, 2014

       Initially, the district court determined that Black Fire’s three months to contest the Award

began to run on October 24, 2014, when Tallakoy filed the Award in Tallakoy I. However, the

district court later correctly acknowledged that this was the wrong date. First, the Award was not

filed in a “manner that is permitted by law,” because the complaint in Tallakoy I had been

dismissed and the case had been administratively closed. AAA R. 49. Second, Tallakoy’s

motion to enforce the Award was not served on the unrepresented parties, including Black Fire,

so it was not “delivered” under the FAA on October 24, 2014.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

               iii. December 23, 2014

       On December 23, 2014, Tallakoy filed its complaint in Tallakoy II with a copy of the

Award attached. This was a “filing of the award in any other manner that is permitted by law.”

AAA R. 49. This filing was properly served on all parties so it was also “delivered” under the

AAA rules. This date can be considered the proper date to start Black Fire’s three-month time

period to challenge the Award under FAA § 12 assuming there is no earlier date upon which the

period would begin.

               iv. Other dates suggested by Tallakoy

       Tallakoy argues that it sent the Award to Black Fire and that it was delivered to various

Black Fire representatives in November 2014. Specifically, Tallakoy argues that it mailed the

Award to each of the defendants on November 13, 2014. It then relies on certified mail receipts

signed by Alice Weed and Gil Brown, purportedly Black Fire representatives, to argue that the

Award had been “delivered” to Black Fire. Further, Tallakoy argues that Stodin received the

Award on October 27, 2014, and thus Black Fire either received the Award or at least knew

about the Award by that date. The district court did not address or make any factual findings as

to these dates. Accordingly, in the interest of justice, we remand this matter to the district court

to determine whether there is evidence to support delivery or knowledge of the Award by Black

Fire on these dates.

       Given the inadequacy of the record to determine whether the Award was “filed or

delivered” on September 23, 2014, we reverse the judgment of the district court and remand for

further factual findings consistent with this opinion. As part of its consideration, the district

court should consider whether filing or delivery of the Award occurred in November 2014, on
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.

September 23, 2014, or on other asserted dates. Consequently, we need not address whether the

Award is valid, because the issues of “filing” or “delivery” are not yet resolved.

                                       IV. CONCLUSION

       For the reasons stated above, we reverse the decision of the district court and remand for

further proceedings consistent with this opinion.