Court Opinion

ID: 1013694
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:05:16.029342+00
Date Added: 2024-06-11T15:11:46.677436
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

CHOICE HOTELS INTERNATIONAL,           
INCORPORATED,
                 Plaintiff-Appellee,
                 v.                            No. 03-2075
NITEEN HOTELS (ROCHESTER) LLC;
RAMESH BHATIA,
            Defendants-Appellants.
                                       
           Appeal from the United States District Court
            for the District of Maryland, at Greenbelt.
              Deborah K. Chasanow, District Judge.
                      (CA-02-3586-DKC-8)

                      Argued: June 3, 2004

                      Decided: July 9, 2004

         Before LUTTIG and KING, Circuit Judges, and
         Robert R. BEEZER, Senior Circuit Judge of the
       United States Court of Appeals for the Ninth Circuit,
                      sitting by designation.

Affirmed by unpublished per curiam opinion.

                           COUNSEL

ARGUED: Jeffrey Michael Goldstein, GOLDSTEIN LAW GROUP,
Washington, D.C., for Appellants. Kerry Shanahan McGeever,
CHOICE HOTELS INTERNATIONAL, INCORPORATED, Silver
2               CHOICE HOTELS INT’L v. NITEEN HOTELS
Spring, Maryland, for Appellee. ON BRIEF: John C. Murphy, Balti-
more, Maryland, for Appellants.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   Niteen Hotels and Ramesh Bhatia (collectively "Niteen") appeal
from the Order entered on August 8, 2003, in the District of Mary-
land, granting the petition of Choice Hotels International to confirm
an arbitration award and denying Niteen’s petition to vacate that
award. Niteen contends that the district court erred and that the arbi-
tration award was defective because the arbitrator improperly
excluded Niteen’s counsel from the arbitration hearing. As explained
below, we affirm.

                                  I.

   On June 16, 1999, Choice Hotels and Niteen entered into a fran-
chise agreement (the "Agreement") providing, inter alia, that Niteen
would operate a Quality Inn owned by Choice Hotels in New York
in exchange for the payment of certain fees. The Agreement con-
tained an arbitration provision requiring all controversies or claims
"arising out of or relating to" the Agreement, or a breach of the
Agreement, to be resolved by "final and binding arbitration." Any
such arbitration proceeding was to be conducted before the American
Arbitration Association (the "AAA") or J.A.M.S./Endispute in accor-
dance with the Commercial Arbitration Rules (the "AAA Rules").
Agreement ¶ 22.* The Agreement required the arbitrator, in resolving

  *The arbitration clause of the Agreement provides, in pertinent part,
that
                CHOICE HOTELS INT’L v. NITEEN HOTELS                    3
a controversy or claim, to "apply the substantive laws of Maryland."
Id. When Niteen breached the Agreement, Choice Hotels terminated
the Agreement on December 3, 1999.

   On November 19, 2001, Choice Hotels filed a claim against Niteen
with the AAA, seeking damages for Niteen’s breach of the Agree-
ment. The AAA issued an order scheduling an arbitration hearing for
September 17, 2002. Niteen thereafter failed to attend a May 8, 2002,
preliminary hearing, failed to submit required witness lists, exhibit
lists, and a pre-arbitration brief, and did not timely notify the AAA
or Choice Hotels on whether Niteen would be represented by counsel.

   On the afternoon of September 16, 2002, Niteen contacted counsel
for Choice Hotels requesting an agreement to postpone the arbitration
hearing scheduled for the following day, asserting that its counsel, a
Mr. Milazzo, had suffered a neck injury. Counsel for Choice Hotels
refused to agree to a postponement, and that evening an attorney
named Murphy left a telephone message with counsel for Choice
Hotels identifying himself as counsel for Niteen.

   On the morning of September 17, 2002, the attorney for Choice
Hotels phoned Mr. Murphy, who explained that he was not prepared
to proceed with the arbitration hearing (the "Hearing"). In response,
Choice Hotels advised Murphy that it would oppose a postponement
of the Hearing. Later that morning, the parties convened before an
AAA arbitrator, who provided Mr. Murphy with an opportunity to
demonstrate why the Hearing should not proceed as scheduled. Nit-
een, through Ramesh Bhatia, acknowledged that it knew of the sched-
uled arbitration Hearing and that it had received the pre-arbitration
materials submitted by Choice Hotels. Choice Hotels, on the other
hand, asserted that it had not received timely notice that Niteen would

   any controversy or claim arising out of or relating to this Agree-
   ment, or the breach of this Agreement, . . . will be sent to final
   and binding arbitration before either the [AAA] or
   J.A.M.S./Endispute in accordance with the [AAA Rules] . . . .
   The arbitrator will apply the substantive laws of Maryland . . . .
Agreement ¶ 22.
4               CHOICE HOTELS INT’L v. NITEEN HOTELS
be represented by Mr. Murphy and that it had not received any pre-
arbitration materials from Niteen. Mr. Milazzo was contacted by
phone, and he confirmed that he had injured his neck several months
earlier. He advised, however, that he had since resumed the practice
of law.

   The arbitrator then denied Niteen’s request for a postponement of
the Hearing for two reasons. First, he found Niteen’s excuse for being
unprepared, i.e., Mr. Milazzo’s neck injury, "specious." Second, he
concluded that Niteen had failed to comply with the notification
requirements of AAA Rule 26. That rule provides that "[a]ny party
may be represented by counsel or other authorized representative,"
but that

    [a] party intending to be so represented shall notify the other
    party and the AAA of the name and address of the represen-
    tative at least three days prior to the date set for the hearing
    at which that person is first to appear.

AAA Rule 26. As a result of this decision, the arbitrator excluded
Murphy from the Hearing, and Niteen proceeded on a pro se basis.

   On September 18, 2002, Murphy wrote to the AAA to request a
new arbitration hearing, contending that Niteen had been improperly
denied its right to be represented by counsel at the Hearing. Following
briefing on this point, both the arbitrator and the AAA denied Nit-
een’s request for a new hearing. Thereafter, on October 18, 2002, the
arbitrator issued its arbitration award in favor of Choice Hotels.

   On October 31, 2002, Choice Hotels filed its petition in the District
of Maryland, seeking confirmation of the arbitration award. On
November 25, 2002, Niteen filed a petition in the Circuit Court for
Montgomery County, Maryland, seeking to vacate the award. Nit-
een’s state court proceeding was promptly removed by Choice Hotels
to federal court, where it was consolidated with the confirmation pro-
ceeding initiated by Choice Hotels. On August 8, 2003, the district
court confirmed the arbitration award, denied Niteen’s petition to
vacate, and entered judgment in favor of Choice Hotels. In so doing,
the court concluded that: (1) the arbitrator possessed the authority,
under AAA Rule 30, to decline to postpone the Hearing when Niteen
                CHOICE HOTELS INT’L v. NITEEN HOTELS                  5
failed to show good cause for a postponement; (2) the arbitrator could
decide, pursuant to Rule 25, who was entitled to attend and participate
in the Hearing; and (3) the arbitrator’s procedural decisions were not
governed by the Maryland Uniform Arbitration Act (the "MUAA").
Choice Hotels Int’l, Inc. v. Niteen Hotels (Rochester) LLC, No. DKC
2002-3586 (D. Md. August 8, 2003) (the "Opinion"). Niteen has
appealed, and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

                                  II.

   On appeal, Niteen contends that, under the Agreement and the
AAA Rules, the arbitrator exceeded his authority when he excluded
Mr. Murphy from the Hearing. As the district court observed, if a
contract provides for arbitration and the dispute is resolved thereun-
der, substantive review by a court is limited to those grounds set forth
in section 10 of the Federal Arbitration Act. 9 U.S.C. § 10(a). We
may vacate an arbitration award, therefore, only if one of the follow-
ing conditions is met: (1) the award was procured by corruption,
fraud, or undue means; (2) the arbitrator engaged in misconduct or
was not impartial; or (3) the arbitrator exceeded his powers. Id. Nit-
een contends that the arbitrator exceeded his powers in excluding Mr.
Murphy as its counsel and that the award should therefore be vacated.
As explained below, we disagree.

    Pursuant to the Agreement, all controversies and claims arising out
of or relating thereto were to be arbitrated in accordance with the
AAA Rules. And under AAA Rule 26, "[a] party intending to be [rep-
resented by counsel] shall notify the other party and the AAA of the
name and the address of the representative at least three days prior to
the date set for the hearing at which that person is first to appear."
AAA Rule 26. The "shall notify" phrase of Rule 26 is mandatory, and
it is clear that Niteen failed to comply with that provision. We agree
with the district court, therefore, that the arbitrator’s decision to
exclude Murphy from the Hearing did not exceed his authority. Opin-
ion at 8.

   Niteen nonetheless maintains that Mr. Murphy’s exclusion from
the Hearing contravened the provisions of AAA Rule 25, and that the
only proper remedy for its noncompliance with Rule 26 was post-
ponement of the Hearing. Under Rule 25 it is "discretionary with the
6               CHOICE HOTELS INT’L v. NITEEN HOTELS
arbitrator to determine the propriety of the attendance of any person
other than a party and its representatives." Niteen contends that, in
authorizing an arbitrator to exclude any person other than a party and
its representative, Rule 25 precludes an arbitrator from excluding a
party’s representative from an arbitration hearing. This contention
fails, however, because a person does not qualify as a representative
of a party unless the notice requirements of Rule 26 have been com-
plied with. Because Niteen failed to comply with Rule 26, Mr. Mur-
phy did not qualify as Niteen’s representative. Thus, the district court
correctly ruled that the arbitrator was authorized to exclude Mr. Mur-
phy from the Hearing. Id.

   Finally, Niteen maintains that the arbitrator exceeded his authority
in excluding Mr. Murphy from the Hearing because, pursuant to the
Agreement, the arbitrator was bound to apply the substantive laws of
Maryland, which accord Niteen a right of representation. Under the
Agreement, however, the arbitrator was required to conduct the arbi-
tration under the procedural parameters of the AAA Rules, rather
than pursuant to any procedures required by Maryland law. As the
district court observed, the MUAA cannot trump the procedural
notice requirements upon which the arbitrator relied in excluding Mr.
Murphy from the Hearing. See Sovak v. Chugai Pharm. Co., 280 F.3d
1266, 1269 (9th Cir. 2002) (concluding that agreement to apply state
substantive law does not incorporate state procedural rules for arbitra-
tion). Because the arbitrator properly relied on AAA Rules 25 and 26
in excluding Mr. Murphy from the Hearing, the district court did not
err on this point.

                                  III.

   Pursuant to the foregoing, we agree with the district court, and we
affirm its Opinion of August 8, 2003.

                                                           AFFIRMED