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Altruist, LLC v. Medex Patient Transport, LLC

United States District Court, M.D. Tennessee, Nashville Division

April 9, 2018

ALTRUIST, LLC, an Arizona limited liability company, Petitioner,
v.
MEDEX PATIENT TRANSPORT, LLC, a Tennessee limited liability company, KLEIN CALVERT, KYLE CALVERT, Respondents,
v.
SUSAN K. BIGELOW, JOANNA MILKOVICH, Counter-Respondents.

          MEMORANDUM OPINION

          WAVERLY D. CRENSHAW, JR. CHIEF UNITED STATES DISTRICT JUDGE.

         Pending before the Court are conflicting requests: (1) Petitioner's Petition to Confirm Arbitration Award (Doc. No. 1); and (2) Respondents' Motion to Vacate Arbitration Award (Doc. No. 12). For the reasons that follow, the arbitration award will be confirmed.

         I. Background

         On October 23, 2014, Altruist, LLC and Medex Patient Transport, LLC (doing business as Caliber Patient Care) (“Medex”) entered into a Franchise Agreement relating to the provision of emergency medical transportation services. The Franchise Agreement provided that all disputes, except for those involving intellectual property rights or claims for injunctive relief, were to be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”).

         Altruist filed a demand for arbitration on May 27, 2016, alleging intentional misrepresentation/fraud in the inducement, negligent misrepresentation, breach of contract, breach of the covenant of good faith and fair dealing, violation of the Tennessee Consumer Protection Act (“TCPA”), and misrepresentation by concealment. It sought rescission, punitive damages, and attorney's fees.

         The claims were arbitrated from April 25 through 28, 2017. On July 5, 2017, an AAA arbitrator issued an Interim Award that resolved all claims, except the award of attorney's fees, which required further briefing as to the amount.

         In the Interim Award, the arbitrator found in favor of Altruist and its co-owners, Susan K. Bigelow and Joanna Milkovich, on three grounds - breach of the contract, fraudulent inducement, and violation of the TCPA. He also found rescission under the TCPA to be appropriate, and awarded $235, 611.71 (representing damages, interest, AAA fees, and the arbitrator's fees and expenses), of which $29, 968.94 had already been paid. The award was assessed against Medex d/b/a Caliber and its owners, Klein and Kyle Calvert.

         The Final Award (“Award”) assessing an additional $211, 015.81 in attorney's fees and costs was rendered on August 14, 2017, making the total $416, 758.58. Respondents seek to vacate the award on the ground that the arbitrator manifestly disregarded the law in various respects. Altruist requests confirmation of the award, attorney's fees for having to defend this action, and post-judgment interest at a rate set by Tennessee statute.

         II. Standard of Review

         “The Federal Arbitration Act (‘FAA') expresses a presumption that arbitration awards will be confirmed.” Nationwide Mut. Ins. Co. v. Home Ins. Co., 429 F.3d 640, 643 (6th Cir. 2005). Towards that end, “[w]hen courts are called on to review an arbitrator's decision, the review is very narrow; it is one of the narrowest standards of judicial review in all of American jurisprudence.” Samaan v. Gen. Dynamics Land Sys., Inc., 835 F.3d 593, 600 (6th Cir. 2016).

         The FAA itself provides four grounds for vacating an award:

(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.A. § 10.

         Some circuits have recognized “manifest disregard of the law” as a further ground for vacatur of an arbitration award, either as a collective shorthand for the enumerated grounds, see McCarthy v. Citigroup Glob. Markets Inc., 463 F.3d 87, 91 (1st Cir. 2006), or as an independent factor, see Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2003). In Hall St. Assoc., L.L.C. v. Mattel, Inc., 552 U.S. 576, 585 (2008), however, the Supreme Court cautioned against treating this “supposed addition . . . as the camel's nose” for further expansion.

         Since Hall Street, the Sixth Circuit has stated in dicta that “[w]hether ‘manifest disregard of the law' may still supply a basis for vacating an arbitrator's award as ‘a judicially created supplement to the enumerated forms of FAA relief . . is an open question.'” Samaan, 835 F.3d at 600. Nevertheless some panels have “held that despite the Supreme Court's language in Hall Street, the ‘manifest disregard' doctrine remains a viable ground for attacking an arbitrator's decision.” Marshall v. SSC Nashville Operating Co., LLC, 686 Fed.Appx. 348, 352 (6th Cir. 2017).

         In Coffee Beanery, Ltd. v. WW, L.L.C., 300 Fed.Appx. 415, 418-19 (6th Cir. 2008), for example, the court considered “manifest disregard, ” observing that Hall Street addressed efforts by “private parties to supplement by contract the FAA's statutory grounds for vacatur, ” and that, while “the Supreme Court significantly reduced the ability of federal courts to vacate arbitration awards for reasons other than those specified in 9 U.S.C. § 10, . . . it did not foreclose federal courts' review for an arbitrator's manifest disregard of the law.” Likewise, in Grain v. Trinity Health, Mercy Health Servs. Inc., 551 F.3d 374, 380 (6th Cir. 2008), the Sixth Circuit considered “manifest necessity” as a factor, noting that, while the Supreme Court's “reference to the ‘exclusive' statutory grounds for obtaining relief casts some doubt on the continuing vitality of [this] theory” as an additional factor, the “Supreme Court suggested manifest disregard” could still be used as a “shorthand” for the enumerated factors.

         III. Leg ...


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