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Bartlett Grain Co. L.P. v. Sunburst Farms Partnership

United States District Court, Tenth Circuit

July 5, 2013

Bartlett Grain Company, L.P., Petitioner,
v.
Sunburst Farms Partnership; Western Plains Funds, Inc.; and Carol Bloesser, Respondents.

MEMORANDUM & ORDER

John W. Lungstrum United States District Judge

After becoming engaged in a contractual dispute concerning the purchase and sale of bushels of hard red winter wheat, Bartlett Grain Company, L.P. and Sunburst Farms Partnership agreed to submit their dispute to arbitration by the National Grain and Feed Association for resolution. On February 8, 2013, a panel of three arbitrators unanimously concluded that Sunburst Farms had failed to fulfill its contractual obligations, found Sunburst Farms liable for breach of contract, and awarded $276, 553.04 in total damages plus interest at the rate of 3.25% from the date of the decision until payment of the award. Sunburst Farms did not appeal the decision pursuant to the applicable Arbitration Rules and has not paid the award to Bartlett Grain. Bartlett Grain has now filed a petition for order to confirm arbitration award (doc. 1) and Sunburst Farms, in turn, has responded to the petition and has filed a cross-petition to vacate the arbitration award (doc. 5). As explained below, the court grants the petition to confirm the award and denies the petition to vacate the award.[1]

Bartlett Grain’s petition to confirm the arbitration award is made pursuant to section 9 of the Federal Arbitration Act, which states in pertinent part:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.

9 U.S.C. § 9 (emphasis added).[2] Section 10 provides:

(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. The provisions of section 11 concerning modification of an arbitration award are not relevant to this dispute.

Reading these sections together, then, it is clear that the court must grant Bartlett Grain’s petition to confirm the arbitration award unless the award is vacated in accordance with section 10. As the party seeking to vacate the arbitration award, Sunburst Farms bears the burden of establishing that one of the limited grounds exists for setting aside the award. Youngs v. American Nutrition, Inc., 537 F.3d 1135, 1141 (10th Cir. 2008). The showing required to avoid confirmation is “very high, ” see STMicroelectronics, N.V. v. Credit Suisse Securities (USA) LLC, 648 F.3d 68, 74 (2d Cir. 2011), and the court’s review of the arbitration panel’s decision under the FAA is “strictly limited”—a “highly deferential standard [that] has been described as ‘among the narrowest known to the law.’” Bowen v. Amoco Pipeline Co., 254 F.3d 925, 932 (10th Cir. 2001) (quoting ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th Cir. 1995)).

Bearing in mind this deferential standard and Sunburst Farm’s heavy burden, the court turns to Sunburst Farm’s petition to vacate the arbitration award. In its petition to vacate, Sunburst Farms contends that the award must be vacated not based on one of the statutory grounds enumerated in § 10 of the FAA, but based on the “judicially-created” theory that the panel’s decision was made in “manifest disregard of the law.” Burlington Northern & Santa Fe Ry. Co. v. Public Serv. Co., 636 F.3d 562, 567 (10th Cir. 2010). As a threshold matter, Bartlett Grain devotes a substantial portion of its response brief urging that the “manifest disregard of the law” theory did not survive the Supreme Court’s decision in Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2008), such that it is not a viable ground on which to overturn an arbitration award. The Tenth Circuit, albeit in an unpublished decision, has addressed this issue in some detail. Abbott v. Law Office of Patrick J. Mulligan, 440 Fed.Appx. 612, 617-20 (10th Cir. Sept. 21, 2011). In Abbott, the Circuit explained that prior to Hall Street, it had “somewhat equivocally” recognized manifest disregard as an extra-statutory ground for judicial review of an arbitration award. Id. at 619 & n.10. The Circuit further described the split among other Circuits as to whether manifest disregard of the law survived Hall Street:

In the wake of Hall Street, the circuits have split as to whether manifest disregard of the law is still a viable ground on which to overturn an arbitration award. According to the Second, Sixth (in an unpublished decision) and Ninth Circuits, manifest disregard remains a viable standard because an arbitrator who manifestly disregards the law exceeds his powers under 9 U.S.C. § 10(a)(4). See Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009) (“We have already determined that the manifest disregard ground for vacatur is shorthand for a statutory ground under the FAA, specifically 9 U.S.C. § 10(a)(4), which states that the court may vacate ‘where the arbitrators exceeded their powers. . . .’”); Stolt–Nielsen SA v. AnimalFeeds Intern. Corp., 548 F.3d at 95 (2d Cir. 2008) (“[The Supreme Court in Hall Street] did not, we think, abrogate the “manifest disregard” doctrine altogether. . . . [P]arties do not agree in advance to submit to arbitration that is carried out in manifest disregard of the law. Put another way, the arbitrators have thereby ‘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(a)(4).”), overruled on other grounds, 130 S.Ct. 1758 (2010); see also Coffee Beanery, Ltd. v. WW, L.L.C., 300 Fed.Appx. 415, 419 (6th Cir. 2008) (unpublished) ...

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