Filed: Jun. 03, 2014
Latest Update: Mar. 02, 2020
Summary: Case: 13-20644 Document: 00512650335 Page: 1 Date Filed: 06/03/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED June 3, 2014 No. 13-20644 Lyle W. Cayce Clerk WHY NADA CRUZ, L.L.C., also known as Why Not Cruise; GREG ANDERSON, Plaintiffs – Appellants v. ACE AMERICAN INSURANCE COMPANY, Defendant – Appellee Appeal from the United States District Court for the Southern District of Texas USDC No. 4:11-CV-3353 Before KING, HAYNES, and
Summary: Case: 13-20644 Document: 00512650335 Page: 1 Date Filed: 06/03/2014 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED June 3, 2014 No. 13-20644 Lyle W. Cayce Clerk WHY NADA CRUZ, L.L.C., also known as Why Not Cruise; GREG ANDERSON, Plaintiffs – Appellants v. ACE AMERICAN INSURANCE COMPANY, Defendant – Appellee Appeal from the United States District Court for the Southern District of Texas USDC No. 4:11-CV-3353 Before KING, HAYNES, and G..
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Case: 13-20644 Document: 00512650335 Page: 1 Date Filed: 06/03/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 3, 2014
No. 13-20644
Lyle W. Cayce
Clerk
WHY NADA CRUZ, L.L.C., also known as Why Not Cruise; GREG
ANDERSON,
Plaintiffs – Appellants
v.
ACE AMERICAN INSURANCE COMPANY,
Defendant – Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:11-CV-3353
Before KING, HAYNES, and GRAVES, Circuit Judges.
PER CURIAM:*
Plaintiffs-Appellants Why Nada Cruz, L.L.C. and Greg Anderson appeal
the judgment of the district court confirming an arbitration award. They
contend that the arbitrator violated the Federal Arbitration Act, 9 U.S.C.
§ 10(a)(3), (4), in dismissing the arbitration as untimely and in declining to
consider their request for reconsideration. For the following reasons, we
AFFIRM.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 13-20644
I. Factual and Procedural History
On August 15, 2010, the vessel “Sweet Dreams” sunk. Plaintiffs-
Appellants Greg Anderson and Why Nada Cruz, L.L.C., also known as Why
Not Cruise (collectively “Anderson”), sought recovery for the loss under a
yachtsman policy of insurance (“Policy”) issued by Defendant-Appellee ACE
American Insurance Company (“ACE”). The Policy included a provision
requiring disputes to be settled by binding arbitration. The Policy further
provided that the “request for arbitration must be filed within one (1) year of
the date of loss or damage.”
ACE advised Anderson on September 20, 2010 that it had denied his
claim. On July 7, 2011, Anderson’s counsel sent ACE a letter stating:
If you need any other information for your evaluation of the claim
then let me know and I will do what I can to get you the
information as quickly as possible. Afterwards, if ACE still denies
the claim then please contact me to make arrangements for
requesting arbitration under the policy. Otherwise, we have been
instructed to file a lawsuit on August 8, 2011 to preserve our
client(s) [sic] claims.
It appears that ACE did not respond to the letter.
On August 11, 2011, instead of filing for arbitration, Anderson sued ACE
in Texas state court to recover under the Policy for the sinking of the vessel
“Sweet Dreams.” ACE removed the case to federal court and filed an
unopposed motion to compel arbitration and abate the court proceedings,
which the district court granted on February 14, 2012.
More than eight months later, in October 2012, Anderson filed an
arbitration demand with the American Arbitration Association (“AAA”). Once
the parties selected an arbitrator, ACE sought dismissal of the arbitration
proceeding on the ground that Anderson had failed to comply with the Policy’s
requirement that a request for arbitration be filed within one year of the loss.
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After receiving briefing and evidence from the parties, the arbitrator
entered an award dismissing the arbitration on the ground that “the
arbitration was not filed in a timely manner [and] did not meet the specific
requirements, as detailed within the Insurance Policy.” Specifically, the
arbitrator found that “the filing for arbitration dated 25th October 2012, was
over two (2) years two (2) months after the date of loss.” The arbitrator rejected
Anderson’s contention that ACE’s apparent failure to respond to his July 7,
2011 letter waived or tolled the one-year deadline for requesting arbitration.
The arbitrator noted that Anderson’s communications made it clear that
Anderson was aware, before the deadline, of the Policy’s arbitration
requirement. The arbitrator explained that given
the knowledge of the terms of the Policy requiring arbitration to
be filed within twelve (12) months of the date of the loss, and that
the Court had ordered arbitration, the undersigned arbitrator
finds it questionable why Claimants delayed their actual filing of
the arbitration over eight (8) months after being ordered by the
Court and considers this action a critical factor and unreasonable
response.
After the arbitral award was issued, Anderson asked “if the arbitrator
would allow for a Motion to reconsider.” The arbitrator declined, explaining
that “both the claimants and respondents had every opportunity to forward to
me all documentation concerning the timeliness issues in this case in initial
discovery.”
On ACE’s motion, the district court entered an order confirming the
arbitration award and dismissing the suit with prejudice. On July 5, 2013,
Anderson moved for a new trial and to vacate the arbitration award. Along
with the motion, Anderson’s counsel submitted an affidavit providing several
justifications for the eight-month delay between the district court’s order
compelling arbitration and Anderson’s arbitration request, including that
during this period: (1) “[i]n addition to handling this case and other numerous
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legal matters . . . [, Anderson’s counsel] had to prepare and did go to trial on
three separate cases”; (2) ACE’s original counsel switched firms; (3) Anderson’s
counsel took a summer vacation; and (4) counsel for both parties had several
discussions about the logistics of filing for arbitration. The motion for a new
trial was denied on September 30, 2013. Anderson filed a timely notice of
appeal.
II. Standard of Review
“In light of the strong federal policy favoring arbitration, judicial review
of an arbitration award is extraordinarily narrow.” Rain CII Carbon, LLC v.
ConocoPhillips Co., 674 F.3d 469, 471–72 (5th Cir. 2012) (internal quotation
marks and citation omitted). We review “a district court’s confirmation of an
award de novo, but the review of the underlying award is exceedingly
deferential.” Petrofac, Inc. v. DynMcDermott Petroleum Operations Co.,
687
F.3d 671, 674 (5th Cir. 2012) (internal quotation marks and citation omitted).
“An award may not be set aside for a mere mistake of fact or law.” Apache
Bohai Corp. LDC v. Texaco China BV,
480 F.3d 397, 401 (5th Cir. 2007).
III. Discussion
Anderson contends that the arbitrator erred both by: (1) failing to
interpret properly the Policy language in concluding that Anderson failed to
timely request arbitration, and (2) declining to entertain a motion for
reconsideration. Anderson seeks to vacate the arbitration award and to
resubmit the case to arbitration in accordance with the Policy terms.
Sections 10 and 11 of the Federal Arbitration Act, 9 U.S.C. §§ 1–16
(“FAA”), provide “the exclusive means for setting aside or changing an
arbitration award challenged under the FAA.” Citigroup Global Mkts., Inc. v.
Bacon, 562 F.3d 349, 352 (5th Cir. 2009); see also Brook v. Peak Int’l, Ltd.,
294
F.3d 668, 672 (5th Cir. 2002). Section 10 permits vacatur only when, among
other things, “the arbitrators were guilty of misconduct . . . in refusing to hear
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evidence pertinent and material to the controversy” or “the arbitrators
exceeded their powers.” 9 U.S.C. § 10(a)(3), (4).
We first address Anderson’s contention that the arbitrator exceeded his
powers, in violation of § 10(a)(4) of the FAA, by concluding that Anderson’s
request for arbitration was dilatory under the Policy. Arbitral authority
derives from contract. 21st Fin. Servs., L.L.C. v. Manchester Fin. Bank, 13-
50389, 2014 WL 12827, at *2, — F.3d —, — (5th Cir. Mar. 31, 2014). “Where
arbitrators act contrary to express contractual provisions, they have exceeded
their powers.”
Id. at *3 (internal quotation marks and citation omitted). “If
the contract creates a plain limitation on the authority of an arbitrator, we will
vacate an award that ignores the limitation.”
Id. (internal quotation marks and
citation omitted). Nevertheless, “[a] reviewing court examining whether
arbitrators exceeded their powers must resolve all doubts in favor of
arbitration.”
Brook, 294 F.3d at 672.
Anderson has not shown that the arbitrator exceeded his powers in
dismissing the arbitration due to Anderson’s failure to timely request
arbitration under the Policy terms. Anderson argues that the arbitrator should
have found that Anderson timely requested arbitration in his July 7, 2011
letter to ACE, which was sent less than one year after he submitted his claim.
But the Policy required the arbitration “request” to be “filed,” which may
require something more formal than a letter to ACE. And Anderson’s July 7,
2011 letter may not have been a “request” for arbitration because it made any
request contingent on ACE’s further rejection of Anderson’s claim. Moreover,
Anderson acknowledges that the term “request,” as used in the Policy, is
ambiguous, and that the Policy does not specify the form that a request should
take or to whom it should be made. Given the “exceedingly deferential”
standard of review, Petrofac, 687 F.3d at 674, we cannot fault the arbitrator
for his resolution of those ambiguities. See United Paperworkers Int’l Union v.
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Misco, Inc., 484 U.S. 29, 38 (1987) (“Courts . . . do not sit to hear claims of
factual or legal error by an arbitrator as an appellate court does in reviewing
decisions of lower courts.”). Accordingly, the arbitrator did not exceed his
powers by declining to find that Anderson’s reference to arbitration in his July
7, 2011 letter was a “request for arbitration.”
Anderson further contends that, in determining that Anderson’s
arbitration request was untimely, the arbitrator impermissibly relied on
events that occurred after the Policy’s one-year deadline for requesting
arbitration. In particular, Anderson asserts that the arbitrator’s consideration
of the eight-month delay between the district court’s order compelling
arbitration and Anderson’s arbitration demand has no basis in the Policy
language.
The arbitrator’s discussion of that delay can be fairly read as relating not
to the issue of whether Anderson failed to file an arbitration request within
one year of the loss, but to Anderson’s equitable argument that ACE waived or
tolled the one-year deadline by not responding to the July 7, 2011 letter. In
rejecting Anderson’s waiver argument, the arbitrator noted that: (1) ACE’s
September 20, 2010 letter denying Anderson’s claim specifically referenced the
Policy’s arbitration clause and the one-year contractual limitations period; (2)
Anderson’s December 9, 2010 and July 7, 2011 letters to ACE acknowledged
the Policy’s arbitration requirement; (3) Anderson did not file an arbitration
demand until more than 26 months after the loss and 8 months after the
district court compelled arbitration; and (4) when Anderson did eventually
demand arbitration, he made the demand without assistance from ACE. In
light of these findings, and their purpose, the arbitrator did not exceed his
powers in considering Anderson’s actions after the one-year deadline for filing
an arbitration request had run, or in rejecting Anderson’s argument that this
deadline was waived or tolled.
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We next turn to Anderson’s second issue on appeal: that the arbitrator
improperly denied him an opportunity to present evidence showing the reasons
for the eight-month delay between the district court’s order compelling
arbitration and Anderson’s arbitration demand. Anderson states that, during
that period, his counsel had three trials and went on summer vacation; ACE
changed counsel; the parties discussed alternatives to submitting the
arbitration to the AAA; and the parties had several discussions regarding the
wording of the arbitration demand and the payment of filing fees. Anderson
contends that the arbitrator’s refusal to permit a motion for reconsideration,
with which he could present this evidence, violated FAA § 10(a)(3)’s prohibition
on arbitrators “refusing to hear evidence pertinent and material to the
controversy,” and rendered the arbitration proceeding fundamentally unfair.
We cannot fault the arbitrator for declining to consider evidence that was
not timely presented to him. ACE raised, in its application to dismiss the
arbitration proceeding, the issue of the delay between the district court’s order
compelling arbitration and Anderson’s arbitration demand to the AAA.
Anderson had ample opportunity to present, in his response brief, evidence
explaining and mitigating the impact of that delay, and supporting his waiver
defense. We have held that “arbitrators enjoy inherent authority to police the
arbitration process and fashion appropriate remedies to effectuate this
authority.” Hamstein Cumberland Music Grp. v. Williams, 532 F. App’x 538,
543 (5th Cir. 2013). Thus, the arbitrator did not commit misconduct, in
violation of § 10(a)(3), by declining to give Anderson a second opportunity, after
the arbitration award already had issued, to present evidence supporting his
opposition to dismissal of the arbitration.
IV. Conclusion
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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