Court Opinion

ID: 2786331
Source: CourtListenerOpinion
Date Created: 2015-03-16 14:00:59.598204+00
Date Added: 2024-06-11T11:05:08.113080
License: Public Domain

Case: 14-11549    Date Filed: 03/16/2015   Page: 1 of 17

                                                             [DO NOT PUBLISH]

                IN THE UNITED STATES COURT OF APPEALS

                         FOR THE ELEVENTH CIRCUIT
                           ________________________

                                 No. 14-11549
                           ________________________

                      D.C. Docket No. 1:10-cv-22353-MGC

RODNEY SCHATT,
individually and on behalf of all
persons similarly situated,
                                                                Plaintiff-Appellant,

                                         versus

AVENTURA LIMOUSINE & TRANSPORTATION
SERVICE, INC.,
agent of
d/b/a/ Aventura Limousine and Aventura
Worldwide,
SCOTT TINKLER,

                                                             Defendants-Appellees.

                           ________________________

                   Appeal from the United States District Court
                       for the Southern District of Florida
                         ________________________

                                    (March 16, 2015)
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Before HULL and DUBINA, Circuit Judges, and BOWEN, * District Judge.

PER CURIAM:

       Plaintiff Rodney Schatt, a limousine driver, appeals the vacatur of an interim

arbitral award secured against his former employer. After careful review, we hold

that the district court was without jurisdiction to vacate the interim award. 1

                                   I. BACKGROUND

       On July 29, 2010, plaintiff Rodney Schatt filed an amended complaint

against defendants Aventura Limousine & Transportation Service, Inc., and Scott

Tinkler (collectively, “Aventura”). Schatt’s suit claims he and others were

misclassified as independent contractors and denied overtime pay by Aventura in

violation of the Fair Labor Standards Act (the “FLSA”), 29 U.S.C. § 201 et seq.

A.     Compelling Arbitation

       On August 30, 2010, defendant Aventura filed a motion to compel

arbitration and stay proceedings until completion of arbitration or, in the

alternative, to dismiss the action. The parties had previously executed an

agreement stating:

              The parties agree that any dispute, claim, or controversy
              arising out of or relating to this Agreement, the breach,

       *
        Honorable Dudley H. Bowen, Jr., United States District Judge for the Southern District
of Georgia, sitting by designation.

       1
       Although originally scheduled for oral argument, this appeal was removed from the oral
argument calendar by unanimous agreement of the panel. See 11th Cir. R. 34-3(f).
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             termination, enforcement, or validity thereof, or any
             other matter regarding the legal relationship between
             [Aventura], [Schatt], or its employees, including the
             determination of the scope or applicability of this
             agreement to arbitrate, shall be determined by a single
             arbitrator in proceedings administered by the American
             Arbitration Association, pursuant to its Commercial
             Arbitration Rules.

Aventura argued then that the district court “ha[d] no jurisdiction to determine the

scope of the issues subject to arbitration, in that the parties also have agreed that

both the applicability and the scope of the arbitration agreement [we]re to be

determined by an arbitrator.”

      On November 30, 2010, Aventura prevailed on this argument. District

Court Judge Marcia Cooke granted Aventura’s motion to compel arbitration and

stayed the litigation, ordering the clerk to close the case and denying any pending

motions as moot.

      The dispute then proceeded to arbitration before an American Arbitration

Association arbitrator.

B.    New Counsel and the Arbitral Hearing

      In October 2011, Schatt hired new counsel, attorneys Richard Celler and

Stacey Schulman of the firm Morgan & Morgan, P.A., to represent him in the

arbitration. Celler and Schulman at that time also represented other plaintiffs in

related FLSA actions against Aventura.

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      From January 16 through January 18, 2012, arbitrator Sheila Cesarano

conducted a three-day hearing, which both parties and the district court termed the

“final hearing” or “final arbitration hearing.” The hearing addressed the central

dispute as to liability, whether Schatt was an employee as defined by the FLSA

rather than an independent contractor as Aventura argued. Following the hearing,

Cesarano required each party to submit proposed findings of fact and conclusions

of law along with final briefs by February 28, 2012.

C.    The Motion to Disqualify

      On February 24, 2012, defendant Aventura filed a motion in the district

court to disqualify Morgan & Morgan and its lawyers as well as a motion to stay

the arbitration pending resolution of the motion to disqualify. Specifically,

Aventura alleged that Richard Celler violated several of the Florida Bar Rules of

Professional Conduct in his representation of Schatt and other plaintiffs in their

FLSA claims against Aventura. In addition to an array of unprofessional and

hostile behavior, Celler allegedly engaged in ex parte communications with the

defendant designed to undermine defense counsel.

D.    The Interim Award on Liability

      On March 28, 2012, while the disqualification motions were pending, the

arbitrator issued the “Interim Award on Liability.” The arbitrator found for

plaintiff Schatt, determining: (1) “as a matter of law, that [Schatt] was an employee

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as defined by the FLSA,” rather than an independent contractor, and (2) that Schatt

“should have been paid overtime for hours worked over forty (40) hours in a

workweek.”2

       Immediately following this finding the arbitrator addressed the issue of

damages. The Interim Award stated: “[b]ecause the issue of liability was bifurcated

from the issue of damages, I will set another hearing via separate Order, as to

damages, if necessary, as discussed below.” (emphasis added). Further explaining

this, the arbitrator determined that “[t]he amount of wages owed [Schatt] as well as

the amount of liquidated damages and reasonable attorneys’ fees and costs shall be

determined at a separate hearing . . . absent the parties agreeing to the amounts in

question.” The arbitrator “urged [the parties] to confer regarding damages to avoid

the necessity of a hearing” and concluded by stating that the Interim Award would

“remain in full force and effect until such time as a final Award is rendered.”

E.     The Disqualification Dispute

       On April 10, 2012, the district court granted defendant Aventura’s motion to

stay the arbitration pending resolution of the disqualification motion. Given Celler

       2
         Aventura filed a motion with the arbitrator to stay the arbitration proceedings. On or
about February 27, 2014, the arbitrator denied this motion for a stay, noting that “the briefing
schedule in this matter will remain as is” and that as no court order had then stayed the
arbitration, the arbitrator would “continue with administration.” Importantly, post-hearing briefs
were due February 28, 2012, the following day. On March 8, 2012, the arbitrator confirmed to
the parties that the hearing was concluded, the arbitral record was closed, and that the arbitrator
would render the award on liability by March 30, 2012.
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and Morgan & Morgan’s representation of other plaintiffs in similar actions,

Aventura filed similar motions in those cases.

      On April 11, 2012, Aventura filed a motion to consolidate its

disqualification motion in this case with a nearly identical motion in Robson

Coelho v. Aventura Limousine & Transportation Service, Inc., Case No. 1:10-cv-

23228-MGC (S.D. Fla.), also before District Court Judge Cooke. Both the

disqualification and consolidation motions were referred to a magistrate judge.

      On April 12, 2012, the magistrate judge granted the consolidation motion

but deferred ruling on the disqualification motion pending the resolution of yet

another related disqualification motion, this one in Bedoya v. Aventura Limousine

& Transportation Service, Inc., 861 F. Supp. 2d 1346 (S.D. Fla. 2012), before

District Court Judge Cecilia Altonaga.

      In Bedoya, following several evidentiary hearings, District Court Judge

Altonaga ruled that the gravity of the professional misconduct warranted

disqualification of Celler, Schulman, and the Morgan & Morgan firm representing

plaintiff Bedoya in that action. Id. at 1373. Specifically, Judge Altonaga found

that: (1) Celler’s ex parte communication with defendant Scott Tinkler about

defense counsel compromised defendants’ attorney-client relationship and affected

the proceedings in Bedoya; (2) Morgan & Morgan’s ex parte communication with,

and securing of an affidavit from, Michael Goetz (who had an employment

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relationship with Aventura) was both improper and went to “an issue central to”

the Bedoya case; and (3) that Celler’s lack of professionalism as evidenced by a

variety of inappropriate and hostile behaviors also worked to compromise the

Bedoya case. Id. at 1356-58, 1370-71.

        On May 16, 2012, District Court Judge Altonaga granted the motion to

disqualify in Bedoya. Id. Because Judge Altonaga was not presented with any

legal question beyond disqualification in Bedoya, she did not comment on the

effect of such disqualification, either in the Bedoya action or, critically, in this

case.

F.      Withdrawal and New Counsel

        On May 21, 2012, citing Judge Altonaga’s order, Stacey Schulman, on

behalf of herself and Morgan & Morgan, filed a motion to withdraw as counsel for

plaintiff Schatt in this action. Though not explicitly requesting it, the motion to

withdraw, in a footnote, indicated that “the stay [of arbitration] may no longer be

necessary” given counsel’s withdrawal.

        On the same day, Aventura responded in partial opposition to Schulman’s

motion to withdraw to address the stay of arbitration. Aventura “vehemently

oppose[d] any lifting of the stay” and argued that for the case to continue at that

time would be “ludicrous.”

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      On May 31, 2012, new counsel Brian Lerner filed a notice of appearance on

behalf of plaintiff Schatt.

G.    Motion to Lift the Stay of Arbitration

      On June 8, 2012, attorney Lerner filed a motion to lift the stay of the

arbitration on behalf of plaintiff Schatt. The motion argued that “the stay of

arbitration should be lifted in conjunction with the Court granting the pending

motion to withdraw by Morgan & Morgan, with any remaining issues to be

litigated addressed by the arbitrator.” The motion further acknowledged

Aventura’s opposition to lifting of the stay, but argued that any issues arising from

Morgan & Morgan’s representation of Schatt were “for the arbitrator to decide”

and that Aventura’s arguments to the contrary were merely an attempt “to unwind

the arbitration.”

      On the same day, Aventura filed a response, arguing that lifting of the stay

would be inappropriate given the attorney misconduct that gave rise to the

withdrawal. Aventura argued: “By seeking to continue the arbitration proceedings

herein, and thus take advantage of the Interim Award, Plaintiff is indeed

attempting to profit from his counsel’s misconduct.”

      On June 9, 2012, Schatt’s new counsel Lerner filed a reply.

H.    Motion to Vacate the Interim Award of Liability

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      On June 18, 2012, Aventura filed a motion for dismissal of the action with

prejudice or, in the alternative, for vacatur of the Interim Award. The motion also

sought attorney’s fees as a sanction for the earlier misconduct. In sum, Aventura

“maintain[ed] that by virtue of the all-consuming acts of attorney misconduct that

tainted the arbitration, the Interim Award cannot be permitted to stand, and

Plaintiff may not otherwise profit by virtue of the misconduct that already has

caused Defendants to suffer greatly.” Relevant to this appeal, Aventura wrote:

             In the instant case, there already is an “Interim Award”
             that has been rendered by the arbitrator. To the extent
             that award is deemed to be a “final” award for purposes
             of the Federal Arbitration Act, the law recognizes that
             even a “final” award may be set aside by a district court.

In addition, Aventura argued that, if vacatur of the Interim Award were to be

granted, the matter should be reassigned to “a different arbitrator than that already

involved because to remand to the same arbitrator would preserve an advantage in

favor of Plaintiff that would just be unfair.”

      On June 21, 2012, the magistrate judge, after a hearing on the motion to

withdraw, issued an order “adopt[ing] the findings of fact and conclusions of law

contained in Judge Altonaga’s order in Bedoya,” granting Schulman and Morgan

& Morgan’s motion to withdraw as plaintiff Schatt’s counsel, and denying as moot

Aventura’s motion to disqualify counsel. The magistrate judge’s order did not

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address issues raised by either plaintiff Schatt’s motion to lift the stay of arbitration

or by defendant Aventura’s motion to dismiss or vacate the Interim Award.

      On July 5, 2012, Schatt filed his response to Aventura’s motion. In his

response, he argued that, in line with the arbitration agreement, the issues raised by

Aventura’s motion were “subject to determination by the arbitrator” and that, as a

result, Aventura’s motion was “not properly before” the district court.

      Further, plaintiff Schatt argued that defendant Aventura’s motion for vacatur

of the Interim Award could not be decided by the district court because the Federal

Arbitration Act (the “FAA”) allows review of “final arbitration awards only, but

not of interim or partial rulings.” With respect to the jurisdiction of the district

court to vacate the Interim Award, Schatt characterized Aventura’s motion as an

improper interlocutory appeal of a non-final award.

      On July 19, 2012, Aventura filed its reply. Regarding the finality of the

Interim Award, Aventura argued that its motion for vacatur was procedurally

proper because “the ‘Interim Award’ issued by the arbitrator [was], in fact, a ‘final’

award and, therefore, properly subject to a motion to vacate.” Stating that “titles

do not control,” Aventura maintained that because (1) only the “subsidiary matter

of damages” remained to be determined and (2) “there [was] no claim or defense

left to try,” the Interim Award should be read as final.

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      On June 25, 2013, District Court Judge Cooke held a hearing on plaintiff

Schatt’s motion to lift the stay of arbitration and on defendant Aventura’s motion

to vacate the arbitral award.

I.    The District Court Order

      On April 8, 2014, twenty-two months after Schatt sought to lift the stay of

arbitration and Aventura sought to dismiss the action or vacate the arbitral award,

the district court entered an omnibus order. The district court denied Schatt’s

motion to lift the stay and granted in part and denied in part Aventura’s motion to

dismiss or vacate. The district court denied the motion to dismiss the case, granted

the vacatur motion, ordered the Interim Award vacated, and directed the parties to

a new arbitration before a new arbitrator.

      In analyzing the vacatur motion, the district court found that “[t]he Interim

Award at issue here [was] sufficiently ‘final’ for review because the arbitrator

resolved the issue of liability, leaving only the amount of damages for a later

determination.” The district court further found that “[s]uch calculations do not

prevent the award from being set aside under Sections 10 and 12 of the FAA.”

      After establishing, in its view, the authority to act on the vacatur motion, the

district court found that the Interim Award fell within the statutory grounds for

vacatur of an arbitral award because it was “procured by corruption, fraud, or

undue means.” Adopting District Court Judge Altonaga’s findings in the Bedoya

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action, the district court found that the attorney misconduct in this action

sufficiently affected the action to undermine the fairness of the award rendered.

      On the same day the omnibus order was issued, plaintiff Schatt filed notice

of this appeal.

                          II. STANDARD OF REVIEW

      This Court reviews de novo the district court’s legal conclusions underlying

an order vacating an arbitration award while reviewing its findings of fact for clear

error. Offshore Marine Towing, Inc. v. MR23, 412 F.3d 1254, 1255 (11th Cir.

2005). We also review de novo the district court’s determination of whether it has

subject matter jurisdiction. Gupta v. McGahey, 709 F.3d 1062, 1064-65 (11th Cir.

2013).

                                 III. DISCUSSION

      We begin, as we must, by determining whether the district court had

jurisdiction to vacate the Interim Award. It is beyond debate that the district court

had initial subject-matter jurisdiction over the FLSA action. It falls to us, however,

to determine if the Interim Award was a “final” arbitration award under the

meaning of the FAA. After careful review, we hold that it was not, and therefore

the district court was without jurisdiction to vacate the Interim Award.

      Defendant Aventura, the appellee here, declined to file a responsive brief in

this appeal, instead “relying solely on the reasoning of the district court order

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below as well as the findings by the district court in Bedoya . . . .” Plaintiff Schatt,

in his opening brief, advances arguments to which Aventura attempts no response.

Although we decide the question of the district court’s jurisdiction against the

backdrop of our prior precedent, the wisdom of our sister circuits, and with a

fidelity to the language, structure, and purpose of the FAA, we note that the

appellee here could not have been less helpful in accomplishing this task. See

Lansdale v. Air Line Pilots Ass’n Int’l, 430 F.2d 1341, 1342 (5th Cir. 1970)

(“Appellee did not file a brief so we are without the benefit of argument to support

the district court’s position.”);3 United States v. Varmado, 342 F. App’x 437, 440

(11th Cir. 2009) (“The [appellee] did not file a brief in this appeal, so we can only

guess what the [appellee] thinks about that defense at this point in the

proceedings.”).

A.     The Language of the FAA

       The validity of an arbitration agreement is generally governed by the FAA, 9

U.S.C. § 1 et seq., enacted in 1925 to reverse the longstanding judicial hostility

toward arbitration. Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1367

(11th Cir. 2005). The FAA embodies a liberal federal policy favoring arbitration

agreements. Id. (quotations omitted). The FAA’s clear purpose is “to relieve

       3
         Although we do not here cite a holding, this Court adopted as binding precedent all Fifth
Circuit decisions prior to October 1, 1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209
(11th Cir. 1981) (en banc).
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congestion in the courts and to provide parties with an alternative method for

dispute resolution that is speedier and less costly than litigation.” Id. (alterations

adopted).

      Section 10 of the FAA allows the district court to vacate an arbitral award

under a set of statutorily-prescribed circumstances. Specifically, § 10 reads:

             (a) In any of the following cases the United States court
             in and for the district wherein the award was made may
             make an order vacating the award upon the application of
             any party to the arbitration—
             (1) where the award was procured by corruption, fraud,
             or undue means;
             (2) where there was evident partiality or corruption in the
             arbitrators, or either of them;
             (3) where 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) where 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.

      Courts interpreting this statutory provision commonly understand this to

mean that the FAA allows review of final arbitral awards only, but not of interim

or partial rulings. See Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603,

605 (5th Cir. 1995) (“By its own terms, § 10 [of the FAA] authorizes court action

only after a final award is made by the arbitrator.”); Michaels v. Mariforum

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Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980) (holding that § 10 “has no

application to an interim award that the arbitrators did not intend to be their final

determination on the issues submitted to them”). This limited review is consistent

with the long-held principle that review of arbitral awards is “among the narrowest

known to the law.” Del Casal v. Eastern Airlines, Inc., 634 F.2d 295, 298 (5th Cir.

1981).

B.    As Applied to This Case

      Here, the Interim Award on Liability clearly established that the arbitrator’s

work was not complete. The order itself states that a separate hearing would be

required if the parties failed to agree on backpay, liquidated damages, and

attorney’s fees and costs.

      As plaintiff Schatt argues, the issue of backpay, in particular, demonstrates

that the Interim Award cannot be viewed as final. An arbitral hearing on damages

is necessary to determine which of Schatt’s hours worked are compensable under

the FLSA. The calculation of damages, to be set for a separate hearing, was

necessary to render the arbitral result final. See Savers Prop. & Cas. Ins. Co. v.

Nat'l Union Fire Ins. Co. of Pittsburg, Pa., 748 F.3d 708, 719 (6th Cir. 2014)

(“Here, the arbitration panel issued an interim award resolving only the matter of

liability; the panel retained jurisdiction to compute [claimant’s] damages. Under

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these circumstances, the arbitration was not complete because there was no ‘final’

award.”).

      Further, the cases cited by the district court do not support its ultimate

conclusion. The district court’s order cited several cases where the only issue

remaining to be determined was attorney’s fees. See, e.g., In re Rollins, Inc., 552 F.

Supp. 2d 1318, 1324 (M.D. Fla. 2004) (award “disposed of all of the Respondent’s

Counts, Petitioners’ Counterclaim, and awarded damages” with the only issue

remaining being attorney’s fees); Cont’l Cas. Co. v. Staffing Concepts, Inc., No.

8:09-CV-02036-T-23, 2011 WL 7459781, at *4 (M.D. Fla. Dec. 20, 2011) report

and recommendation adopted, No. 8:09-CV-2036-T-23AEP, 2012 WL 715652

(M.D. Fla. Mar. 5, 2012) (award decided “all of the claims and defenses of both

parties” with only issue remaining being attorney’s fees); Nu-Best Franchising,

Inc. v. Motion Dynamics, Inc., No. 805CV507T27TGW, 2006 WL 1428319, at *4

(M.D. Fla. May 17, 2006) (award “determined liability, damages and entitlement

to attorneys’ fees and administrative expenses” with the only issue remaining being

amount of attorney’s fees). Unlike these cases, Schatt’s ongoing arbitration

involved far more remaining work than merely the calculation of attorney’s fees.

      Because the Interim Award was not a final arbitral award, it was not

properly under review by the district court. As we decide that the district court

was without jurisdiction to vacate the Interim Award, we do not reach or comment

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upon the district court’s reasoning in deciding to vacate the award. We do stress,

however, that approaching five years have passed since plaintiff Schatt initially

filed his FLSA claim and accordingly we counsel against further delay.

                                 IV. CONCLUSION

      For the foregoing reasons, we reverse the district court’s vacatur of the

Interim Award and remand the case, directing the district court to lift the stay of

arbitration and to compel the parties to return to the prior arbitration. Nothing

herein precludes any party from making a motion to the prior arbitrator regarding

the effect, if any, of the disqualification of plaintiff’s counsel.

      REVERSED and REMANDED.

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