-
USCA1 Opinion
United States Court of Appeals
For the First Circuit
____________________
Nos. 96-2246
97-1570
MCI TELECOMMUNICATIONS CORPORATION,
Plaintiff, Appellee,
v.
MATRIX COMMUNICATIONS CORPORATION,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge] ___________________
[Hon. Patti B. Saris, U.S. District Judge] ___________________
____________________
Before
Boudin, Circuit Judge, _____________
Coffin, Senior Circuit Judge, ____________________
and Dowd,* Senior District Judge. _____________________
____________________
Richard W. Miller with whom Stephen R. Miller, Andrew C. __________________ __________________ __________
Gately, John D. Hanify, and Joseph A. Cortellini were on brief ______ _______________ ____________________
for appellant.
Paul M. Smith with whom Ross B. Bricker, Terri L. Mascherin, _____________ _______________ __________________
Mark A. Berthiaume, Louis J. Scerra, Jr., and David J. Brecher ___________________ _____________________ _________________
were on brief for appellee.
____________________
January 27, 1998
___________________
____________________
*Of the Northern District of Ohio, sitting by designation.
COFFIN, Senior Circuit Judge. The parties in this case have ____________________
been engaged in a heated battle over the proper setting for their
underlying legal dispute. Appellee MCI Telecommunications Corp.
insists that the conflict must be resolved through arbitration,
while appellant Matrix Communications Corp. asserts that the
arbitration clause in the parties' contract does not apply here,
and that it is entitled to a judicial forum for its claims. The
district court sided with MCI -- thus ordering arbitration -- and
then rejected Matrix's motion under Fed. R. Civ. P. 60(b) to set
aside that ruling based on newly discovered evidence. Matrix
appeals both the judgment on the merits and the Rule 60(b)
decision. After close review of the tangled procedural backdrop
and the substantive issues, we affirm.
I. Factual and Procedural Background _________________________________
Little needs to be said about the companies' underlying
dispute, which arises from an October 1995 agreement (the "Agent
Agreement") in which MCI gave Matrix limited agency to sell MCI
services. The Agent Agreement provided for substantial
commissions if Matrix generated a specified minimum amount of
revenue for MCI. Matrix alleged, inter alia, that MCI improperly _____ ____
terminated the Agent Agreement eight months later, in June 1996,
because Matrix was so successful in obtaining customers that MCI
owed it more than one billion dollars in commissions that the
corporation did not wish to pay. MCI countered that termination
was proper because Matrix breached the terms of the Agent
Agreement in various ways.
-2-
Following MCI's termination, Matrix filed suit in
Massachusetts state court. MCI removed the action to federal
court. It then moved to stay the litigation and compel
arbitration, on the ground that the language of the arbitration
clause in the Agent Agreement unambiguously evidenced the
parties' intent to arbitrate all disputes arising from that
agreement. The provision, contained in paragraph 22 of the Agent
Agreement, states:
Any dispute relating to this Agreement shall be
submitted for binding arbitration in accordance with
the rules contained in MCI Tariff FCC No. 1 and
judgement[sic] on any award entered therein may be
entered in any court of competent jurisdiction.
Matrix opposed the motion to stay, arguing that, because MCI
Tariff FCC No. 1 ("the Tariff") expressly limited arbitration to
customer billing disputes of $10,000 or more, and Matrix neither
was a customer nor had a billing dispute of any amount with MCI,
the arbitration clause did not apply to its dispute.1
____________________
1 A tariff is a detailed compilation of charges, regulations
and other relevant information about the provision of
telecommunications services to the public that common carriers
like MCI are required to file with the FCC. MCI Tariff FCC No. 1
is a voluminous document whose "Section B," labeled "Rules and
Regulations," spans 34 pages and contains nineteen separate
rules. Rule No. 7 is labeled "Payment Arrangements" and has
twenty-one subsections. One of those subsections, B-7.13, is
entitled "Arbitration of disputes," and states, in part:
All disputes concerning or affecting payment of
invoices issued after February 28, 1994 for charges
totaling $10,000 and above may be resolved through
binding arbitration.
Subsection B-7.13 is further divided into numerous parts that
detail the procedures to be used in such arbitrations. Section
.1327, for example, requires the Responding Party to file a
written answer within 17 days after the arbitration commences;
-3-
Judge Harrington of the United States District Court for
the District of Massachusetts held a hearing on MCI's motion to
compel arbitration on September 27, 1996. Later that day, he
signed an order granting the motion, concluding that the
arbitration clause unambiguously reflected an intention by the
parties to arbitrate all disputes relating to the Agreement. In ___
his view, the Tariff was referenced not to define the scope of
the agreement to arbitrate but to provide the procedural rules
under which any arbitration would take place.
The same day, Matrix filed a notice of voluntary dismissal
under Fed. R. Civ. P. 41(a)(1)(i).2 In a letter to Judge
Harrington, Matrix's counsel explained that the company had
decided to ask the arbitrator to rule on whether Matrix could
receive all the relief it sought through arbitration. If so,
Matrix would consent to continue the arbitration; if not, Matrix
would refile its action in federal court.
Judge Harrington dismissed the action. On September 30, the
day both the order compelling arbitration and the grant of
dismissal were entered on the docket, Matrix initiated the
____________________
section .133 directs the case manager to hold an administrative
conference within nine days of the arbitration's commencement;
under section .1341, the appointed arbitrator may be removed only
for bias or "other good cause"; section .135 provides for an
exchange of documents and other information within 23 days after
the arbitration commences; and section .1391 provides for the
privacy of all arbitration conferences and hearings.
2 Although Judge Harrington may have ruled before Matrix
filed for dismissal, it appears that Matrix did not learn of the
ruling until later, and believed at the time it filed that the
decision would not be made for several days.
-4-
arbitration by filing a claim with J.A.M.S./Endispute ("JAMS"),
the arbitration administrator designated by MCI in its Tariff.
Matrix argued to the arbitrator, as it had to the court, that its
claims were not arbitrable, and again relied on a reading of the
arbitration clause that limited its scope to billing disputes
exceeding $10,000.
MCI responded two days later, on October 2, by filing its
own action in federal court seeking to compel arbitration of
Matrix's claims. Although Matrix was at that point participating
in arbitration, MCI was concerned that Matrix would not follow
through if the arbitrator decided the threshold questions against
Matrix's position. Because of his involvement in the earlier
proceeding, Judge Harrington was assigned the MCI action.
Without additional hearings or any responsive pleading from
Matrix, he entered an order on October 10 compelling Matrix to
arbitrate all of its claims and awarding MCI attorney's fees.
Meanwhile, the arbitration that Matrix had initiated went
forward, and, on December 10, 1996, the arbitrator ruled that
Matrix's claims were arbitrable but that certain types of relief
sought by Matrix, including multiple damages and attorney's fees,
were unavailable in the arbitration because the Tariff barred
such remedies. In February 1997, Matrix filed a motion in
district court under Fed. R. Civ. P. 60(b), seeking relief from
the October 10 order. Matrix contended that MCI had fraudulently
induced it to enter into the arbitration clause in the Agent
Agreement by concealing an agreement between JAMS and MCI that
-5-
provided for a close working relationship between the two
companies and specified various payments and services to be given
by MCI to JAMS. Matrix argued that the MCI/JAMS Agreement
constituted newly discovered evidence of bias on the part of JAMS
in favor of MCI. MCI opposed the motion, filing affidavits and
other materials in support of its position that the JAMS
Agreement had not been concealed and did not evidence bias on the
part either of JAMS, or, more importantly, the arbitrator.
Following a hearing, District Court Judge Saris denied the
Rule 60(b) motion,3 concluding that Matrix had failed to show the
elements necessary for post-judgment relief, see Hoult v. Hoult, ___ _____ _____
57 F.3d 1, 5-6 (1st Cir. 1995). See infra at 16. ___ _____
Matrix appeals from the October 10, 1996 order compelling
arbitration of its claims, and the March 27, 1997 denial of its
rule 60(b) motion.
II. Discussion __________
Before discussing the district court's October 10 judgment
and its subsequent rejection of Matrix's Rule 60(b) motion, we
must address a threshold issue raised by MCI. It claims that,
because Matrix voluntarily submitted the issue of arbitrability
to the arbitrator, who then determined that Matrix's claims are
arbitrable, Matrix cannot at this juncture challenge the
arbitrator's authority to hear the case. This appeal, MCI
contends, is moot.
____________________
3 The case had been reassigned to Judge Saris subsequent to
Judge Harrington's October 10, 1996 order.
-6-
We have little difficulty in concluding that the appeal
should go forward. From the outset, Matrix explicitly advised
the district court that it would return to the courtroom if the
arbitrator ruled that Matrix could not obtain all the relief it
sought in the arbitral forum. Although MCI cites language
suggesting that Matrix later agreed to arbitrate its claims if
the arbitrator ruled that they were arbitrable, we are persuaded
that that language was unfairly drawn out of context and that
Matrix's actual position has been consistently in opposition to
resolving its claims through arbitration unless it were possible
to obtain full relief. Indeed, we think it disingenuous, and
bordering on effrontery, for MCI to suggest otherwise.
We now turn to the issues raised by Matrix on appeal.
A. The October 10 Ruling _____________________
At the outset of our analysis, it is worth recalling the
context of the district court's decision on October 10 to compel
arbitration. The motion on which the court ruled was filed by
MCI on October 2. Only three working days earlier, on September
27, the court had held a hearing on arbitrability pursuant to
Matrix's action, and had concluded that the Agent Agreement's ________
arbitration clause embraced all disputes. That decision was not ___
enforced then because, virtually contemporaneously, Matrix
dismissed its suit. Seeking to resolve the arbitrability
question, MCI jumped in with its own action, and the court
responded on October 10 by compelling arbitration, thereby
-7-
effectively (though not technically) reinstating its earlier
decision.4
If review of that decision posed only the question whether
the court properly interpreted the Agent Agreement to compel
arbitration of the parties' dispute, our task would be
straightforward and relatively easy. But several factors affect
our analysis, two of which complicate the inquiry. First, the
court ruled before Matrix had answered MCI's complaint seeking to
compel arbitration, and without a hearing, although Section 4 of
the Federal Arbitration Act states that "[t]he court shall hear
the parties" before ordering arbitration to proceed.5 The second
difficulty is that Matrix's appellate challenge to the
arbitration clause includes arguments that the district court
never considered, an omission that typically forecloses us from
taking them into account. See United States v. Bongiorno, 106 ___ _____________ _________
F.3d 1027, 1034 (1st Cir. 1997). The two problems obviously are
____________________
4 Matrix complains that the district court wrongly "based"
its October 10 order on the September 27 order, which had become
a "nullity" once Matrix dismissed its suit. Although Judge
Harrington's October 10 order stated that it was "[i]n accordance
with" the earlier decision, we take that as a shorthand reference
to the content of that decision -- which he chose not to repeat -
- rather than as a statement of precedent governing the October
10 ruling.
5 The relevant portion of the statute states:
The court shall hear the parties, and upon being
satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not
in issue, the court shall make an order directing the
parties to proceed to arbitration in accordance with
the terms of the agreement.
9 U.S.C. 4.
-8-
intertwined; Matrix logically points out that it had no
opportunity to make any arguments to the district court because, ___
in its view, the court ruled prematurely.
The third factor, somewhat simplifying our task, is that
Matrix asserts that it does not challenge any procedural flaws in
the district court's ruling, specifically waiving its complaints
about the speed of the court's judgment and its failure to hold a
hearing. It maintains that we should resolve "the underlying
issue of whether Matrix must arbitrate its claims against MCI
since such a determination is largely a question of law in which
no material facts are in dispute." Procedural errors alone,
therefore, are waived as a basis for vacating the district
court's judgment.6
We address first the straightforward issue: whether the
arbitration clause in the Agent Agreement applies to the present
conflict.7 We think it does, finding unpersuasive Matrix's
argument that the reference to the Tariff in that clause meant
that the Agent Agreement limited arbitration only to customer
billing disputes in excess of $10,000 -- the types of claims
specifically arbitrable under the Tariff. Like the district
court, we think the only sensible reading is that the Tariff was
incorporated to provide a set of procedural rules for
____________________
6 In any event, as we discuss infra at 13-14, Matrix's _____
failure to raise issues before the district court in a motion for
reconsideration bars them on appeal.
7 Our review on this question is de novo. See Keystone __ ____ ___ ________
Shipping Co. v. New England Power Co., 109 F.3d 46, 50 (1st Cir. ____________ _____________________
1997).
-9-
arbitrations arising from the Agent Agreement. Not only is the
opening language of the arbitration clause in the Agent Agreement
broad -- "any" dispute relating to this agreement "shall" be
submitted for arbitration -- but the limited construction
proposed by Matrix would have the absurd result of entirely
negating the arbitration provision. Under Matrix's view, because
the Agreement established an agency relationship between MCI and
Matrix, and the Tariff provided for arbitration only of customer ________
billing disputes, no issue arising between the two parties to the
Agent Agreement could fall within the arbitration clause. Matrix
explains this disjunction by arguing that the clause was inserted
to specify the dispute resolution procedure for customers brought
to MCI by Matrix. We find this argument to be implausible.
Either the MCI Tariff would directly govern the customers' claims
-- making reference to the Tariff in the Agent Agreement
unnecessary -- or the customers themselves would have to agree to
arbitration.
The Tariff language, moreover, reinforces our reading of the
Agent Agreement's arbitration provision. In subsection 7.13, the
portion titled "Arbitration of disputes," see note 1 supra, the ___ _____
Tariff states that arbitrations "shall be conducted under the
arbitration rules and procedures set forth in Sections B-7.131
through B-7.139 (Rules)," which account for more than four pages
of text. Thus, while all of Section B of the Tariff carries the
heading "Rules and Regulations," this portion of Rule 7, which
governs arbitration, makes another, limited use of the term
-10-
"Rules" to denote the specific provisions relating to
arbitration. It is much more reasonable to construe the use of
the word "rules" in the Agent Agreement's arbitration clause to
refer to the limited set of rules concerning arbitration than to
all nineteen rules contained in Section B of the Tariff on a
broad range of subjects.
In addition, when viewed against the backdrop of the federal
policy favoring arbitration, see, e.g., Volt Info. Sciences, Inc. ___ ____ _________________________
v. Board of Trustees, 489 U.S. 468, 475-76 (1989); Moses H. Cone _________________ _____________
Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 _______________ _______________________
(1983),8 and the generous reading given to broadly worded
commercial arbitration agreements, see, e.g., Raytheon Co. v. ___ ____ ____________
Automated Bus. Sys., 882 F.2d 6, 9-11 (1st Cir. 1989), the ____________________
provision here cannot bear the interpretation Matrix seeks to
assign to it. We thus agree with the district court that the
arbitration provision contained in paragraph 22 applies to any
dispute relating to the Agent Agreement, and that the Tariff was
incorporated by reference merely "to guide an arbitrator as to
how he should conduct his hearing."
Having concluded that paragraph 22 requires arbitration
between these parties, we must confront Matrix's assertion that
it was duped into accepting the provision by representations from
____________________
8 The Supreme Court in Moses H. Cone Memorial Hosp. stated _____________________________
that "any doubts concerning the scope of arbitrable issues should
be resolved in favor of arbitration, whether the problem at hand
is the construction of the contract language itself or an
allegation of waiver, delay, or a like defense to arbitrability."
460 U.S. at 24-25.
-11-
MCI officials that the clause applied only to billing disputes
involving customers brought to MCI by Matrix. Fraud in inducing
acceptance of the arbitration clause unquestionably would negate
the contractual agreement on that issue. See generally Prima ___ _________ _____
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-04 & ___________ _________________________
n.12 (1967); see also Three Valleys Mun. Water Dist. v. E.F. ___ ____ ________________________________ ____
Hutton & Co., 925 F.2d 1136, 1139-40 (9th Cir. 1991); Wick v. ____________ ____
Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir. 1979)("[i]f . _____________________
. . the arbitration clause was induced by fraud, there can be no
arbitration").
As noted above, however, Matrix never raised this issue of
fraud before the district court,9 a default that implicates our
bedrock principle that new arguments may not be made on appeal.10
See Bongiorno, 106 F.3d at 1034; Lawton v. State Mut. Life ___ _________ ______ ________________
Assurance Co. of Am., 101 F.3d 218, 222 (1st Cir. 1996). But _____________________
applying this rule to these circumstances presents something of a
puzzle. Matrix maintains that it cannot be penalized for failing
to assert all theories because the district court gave it no ___
opportunity to offer any, having ruled without a hearing and
____________________
9 In fact, in its Memorandum in Opposition to Defendants'
Motion to Stay Action and Compel Arbitration (in the first,
Matrix-filed lawsuit), Matrix stated: "Matrix does not contend
that the parties have not agreed to arbitrate pursuant to the
Tariff Rules, and therefore raises no questions about the
existence or validity of the arbitration agreement generally."
10 In reviewing the district court's substantive ruling, we
may not consider materials added to the record in connection with
the Rule 60(b) motion. See J. Geils Band Employee Benefit Plan ___ ____________________________________
v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1250 (1st Cir. ____________________________
1996).
-12-
before Matrix answered MCI's complaint. Seeking to avoid a
remand, Matrix waives any claim that the court's procedure was
improper and contends that the questions we face are legal in
nature and thus suitable for resolution by the appellate court.
Although we do not wish to condone precipitous action by the
district court (and the procedural irregularities), we have some
difficulty with Matrix's position. First, while interpretation
of the arbitration provision presents a legal question that is as
suitable for our review as for the trial court's, the issue of
fraud is decidedly fact-based and thus inappropriately brought to
us first. We may not assume the trial court's role of
factfinder. In addition, Matrix's assertion that it had no
opportunity to raise the issue of fraud before the district court
is at least somewhat disingenuous. Only days before MCI filed
its action, the district court had held a hearing on the
enforceability of the Agent Agreement's arbitration provision --
with no suggestion of fraudulent inducement. Putting to one side
the technical errors, which Matrix waives, the court reasonably
could assume that Matrix's position with respect to the
arbitration clause would be the same a week later.
It is theoretically possible, of course, for Matrix to have
changed its strategy during that interim, and for the district
court's quick action thus to have deprived Matrix of its most
direct opportunity to air the claim of fraud. If that were the
case, however, we would expect Matrix to have alerted the court
to its new position through a motion for reconsideration.
-13-
Particularly when a new theory turns on questions of fact, we are
disinclined to stray from our longstanding raise-or-waive rule.
If Matrix did not have the information within the post-trial
motion period, its only recourse was through its 60(b) motion.
In short, neglecting to seek reconsideration meant omission
before the trial court of the fraud theory upon which Matrix now
wishes to rely. Although the circumstances here are peculiar, we
conclude that Matrix's "failure to move for reconsideration of
the district court order should not be excused," Vanhaaren v. _________
State Farm Mut. Auto. Ins. Co., 989 F.2d 1, 5 (1st Cir. 1993). _______________________________
Cf. Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 31 (1st Cir. ___ _________ _____________________
1996) ("[T]his court from time to time has refused to permit
appellants to take advantage of supposed oversights that had not
been called to the district court's attention by way of a timeous
motion to reconsider."); United States v. Schaefer, 87 F.3d 562, _____________ ________
570 n.9 (1st Cir. 1996) (failure to move to reopen the
proceedings or for reconsideration undercuts claim of surprise
about use of police report in suppression hearing); Beaulieu v. ________
IRS, 865 F.2d 1351, 1352 (1st Cir. 1989) ("[I]t is a party's ___
first obligation to seek any relief that might fairly have been
thought available in the district court before seeking it on
appeal."). We therefore conclude that Matrix has forfeited its
claim that the arbitration clause should be invalidated on the
basis of MCI's alleged statements that the arbitration clause did
-14-
not apply to the Agent Agreement.11 Consequently, we affirm the
district court's October 10 judgment compelling arbitration.12
B. The Rule 60(b) Motion _____________________
Matrix's effort to undo the October 10 decision via Rule
60(b) rests on the agreement establishing JAMS as the
administrator of MCI's arbitration program. Under Rule 60(b)(2),
____________________
11 We recognize that Matrix's waiver of procedural errors
was motivated by a desire to have its claims heard promptly, in
this court. Omission of the hearing required by Section 4 of the
Arbitration Act also could have been addressed by the district
court if brought to its attention on a motion for
reconsideration, and, even if the issue were not waived, we would
be inclined to view it as defaulted.
12 Equally unavailing is Matrix's new contention that the
Agent Agreement's arbitration clause is invalid because the
Tariff arbitration rules foreclose remedies, such as multiple
damages, to which it is entitled. Putting aside the question of
waiver, this argument must be brought to the arbitrator because
it does not go to the arbitrability of the claims but only to the
nature of available relief. See Great W. Mortgage Corp. v. ___ ________________________
Peacock, 110 F.3d 222, 230-31 (3d Cir. 1997) ("Any argument that _______
the provisions of the Arbitration Agreement involve a waiver of
substantive rights afforded by the state statute may be presented
in the arbitral forum. It would be anomalous for a court to
decide that a claim should be referred to an arbitrator rather
than a court, and then, by deciding issues unrelated to the
question of forum, foreclose the arbitrator from deciding
them."); PaineWebber Inc. v. Elahi, 87 F.3d 589, 599 (1st Cir. _________________ _____
1996) ("[T]he signing of a valid agreement to arbitrate the
merits of the subject matter in dispute presumptively pushes the
parties across the `arbitrability' threshold; we will then
presume that other issues relating to the substance of the
dispute or the procedures of arbitration are for the
arbitrator.")
Matrix's reliance on Graham Oil Co. v. ARCO Prods. Co., 43 ______________ ________________
F.3d 1244 (9th Cir. 1994), is misplaced because, unlike the
plaintiffs there, Matrix's claims are not brought under a statute
specifically designed to protect bargaining rights. The
applicable precedent in our circuit is instead that parties may
contract to limit remedies in arbitration. See Raytheon Co. v. ___ ____________
Automated Bus. Sys., 882 F.2d 6, 12 (1st Cir. 1989); see also ___________________ ___ ____
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 60-62 ___________ _____________________________
(1995) (finding that arbitration agreement did not include "an
unequivocal exclusion of punitive damages claims").
-15-
the district court has discretion to vacate a judgment based upon
"newly discovered evidence which by due diligence could not have
been discovered in time to move for a new trial under Rule
59(b)." See Hoult, 57 F.3d at 5-6.13 To prevail, a moving party ___ _____
must demonstrate that "the missing evidence was `of such a
material and controlling nature as [would] probably [have]
change[d] the outcome.'" Id. at 6 (citations omitted). ___
Matrix argues that the MCI/JAMS Agreement easily satisfies
both the "newly discovered" and "material and controlling" impact
prongs of this standard. First, it asserts that it had no
ability to discovered the concealed agreement, which it contends
____________________
13 Although Matrix relied on both subsections (2) and (3) of
Rule 60(b) in the district court, its briefs on appeal do not
refer to subsection (3), which provides for relief from judgment
based upon fraud, misrepresentation, or other misconduct. See ___
Anderson v. Cryovac, Inc., 862 F.2d 910, 924 (1st Cir. 1988) ________ ______________
(setting forth the standard applicable to 60(b)(3) claims:
retrial mandated only when the challenged misconduct has
"substantially" interfered with aggrieved party's ability to
fully and fairly prepare for and proceed at trial). Matrix's
reply brief contained no such argument even in the face of MCI's
assertion in its brief that the 60(b)(3) claim was waived.
Matrix does argue generally, however, that the district court
orders should be vacated because of fraudulent conduct and
misrepresentations by MCI. To the extent that Matrix has not
waived a 60(b)(3) claim by failing to brief it fully, we find no
abuse of discretion in the district court's rejection of that
claim, as we agree with its conclusion that lack of access to the
MCI/JAMS Agreement was inconsequential in the proceeding before
Judge Harrington. As Matrix posits, if the MCI/JAMS Agreement
had been brought to Judge Harrington's attention, he would have
had to consider, in addition to the contractual language,
"whether a reasonable person would have agreed to an arbitration
provision that called for JAMS to handle the arbitration of
certain disputes, in view of the MCI/JAMS Agreement." As our
discussion of Matrix's 60(b)(2) claim demonstrates, see infra, ___ _____
access to the MCI/JAMS Agreement would not have added measurably
to Matrix's effort to invalidate the Agent Agreement's
arbitration provision.
-16-
even JAMS' general counsel was unaware of until this litigation
commenced.14 Second, Matrix emphasizes that the MCI/JAMS
Agreement reveals an improper relationship involving "substantial
financial and reporting ties" between MCI and JAMS, and it argues
that the Agreement's terms are so obviously suggestive of bias in
favor of MCI that its mere existence is enough to invalidate the
contested arbitration provision.
The district court, after a hearing, found Matrix's argument
lacking in several respects. We may reject its judgment only
upon finding an abuse of discretion, see Ahmed v. Rosenblatt, 118 ___ _____ __________
F.3d 886, 891 (1st Cir. 1997); Hoult, 57 F.3d at 3. We are _____
unable to do so.
Judge Saris initially concluded that Matrix had failed to
show that, with due diligence, it could not have discovered the
evidence earlier. She pointed out that Matrix conceded at oral
argument that corporate sponsored arbitration programs are
commonplace, and that the MCI Tariff named JAMS as the company's
arbitration administrator. Had Matrix been concerned about the
details of the arrangement, she observed, it could have sought to
discover them.
____________________
14 Although Matrix asserts that JAMS' general counsel
"professes he was unaware of the MCI/JAMS Agreement until this
litigation commenced," the attorney, Michael Young, actually
stated that he was unfamiliar with the terms of the agreement, _____
not that he was unaware of any contractual relationship.
Matrix's attorney states that he discovered the agreement in
November 1996 as a result of an offhand remark by an attorney in
an unrelated case.
-17-
Matrix argues on appeal, however, that it was essentially
foreclosed from conducting discovery by the sequence of
proceedings in the district court. In the original Matrix
lawsuit, MCI secured an extension of time to comply with its
obligation to make the voluntary disclosures required under Fed.
R. Civ. P. 26, which had the effect of holding off other
discovery. The court then granted the motion to compel
arbitration before the extended time period had expired. Matrix
argues that MCI therefore managed to avoid producing any
documents, including the undisclosed MCI/JAMS Agreement. In the
subsequent MCI lawsuit, no opportunity for discovery was
presented because the court's ruling preceded any action by ___
Matrix.
We need not resolve whether the district court erred in
finding that Matrix did not exercise due diligence with respect
to the MCI/JAMS relationship because we conclude, infra, that the _____
Agreement between them was not likely to have had an effect on
Judge Harrington's decision. Before moving on to the materiality
discussion, however, we wish to note that MCI's failure to make
the Agreement available when it first was requested from JAMS in
November 1996 is incomprehensible to us.15 Its refusal to do so
____________________
15 Matrix on November 8 requested that a copy of the
Agreement be provided before a meeting scheduled with the
arbitrator for November 15. In a reply sent on November 15, the
JAMS case manager directed Matrix to request the document via
subpoena as provided in the Tariff Arbitration Rules. A
conference was held on November 22 with counsel for both parties
and the arbitrator. Matrix again requested a copy of the
Agreement, but MCI refused to turn it over unless Matrix signed a
strict confidentiality agreement. Matrix would not sign such an
-18-
undoubtedly fueled the already bitter nature of this litigation,
and intensified the wrangling over the Agreement's contents.
Moreover, while the provisions of the MCI/JAMS agreement are not
sufficiently troublesome to warrant the extraordinary relief for
which Rule 60(b)(2) is reserved, they do include matters
unquestionably of interest and concern to parties contracting to
arbitrate with MCI. Our judgment should not be taken to condone
MCI's nondisclosure.
Even if we were to conclude that the district judge erred
in finding a lack of diligence, her judgment that "Matrix's
motion flunks the materiality test" would stand as a separate
barrier to relief. After noting that the burden is on the party
presenting the new evidence to demonstrate that it would probably
have changed the outcome, and that Matrix was not challenging the
impartiality of the arbitrator selected by JAMS, Judge Saris
considered the provisions of the MCI/JAMS Agreement that Matrix
claimed were pivotal. She found only one that caused her to
hesitate in finding that the Agreement was entirely immaterial.
That provision precluded the arbitrator from making findings of
fact and conclusions of law. See App. at 1190 (MCI/JAMS ___
Agreement at Section XIIE). Judge Saris ultimately concluded
that the provision had no significant effect, and we agree.
____________________
agreement. On December 10, the arbitrator entered an order that
all documents exchanged in the arbitration would be confidential,
but Matrix did not receive notice of the order until the next
conference with the arbitrator, on January 8, 1997. The MCI/JAMS
Agreement was given to Matrix at that conference.
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MCI is an institutional litigant and probably has no
interest in having an arbitrator spell out findings and legal
rulings that might be used against it in future cases with its
customers. But there is no reason whatever to think that Matrix
would have regarded such a position as material. Its contract
does not involve ordinary customer disputes, and Matrix is fully
capable of litigating the matters afresh whether before an
arbitrator or in court.
Indeed, Matrix' only explanation as to why it might have
cared about the provision involves a terse suggestion that
arbitrator findings and conclusions might help Matrix establish
willfulness, a requirement that Matrix says is necessary to avoid
a limitation on liability otherwise imposed by the Tariff. That
limitation provision is not part of the Tariff arbitration rules,
however, and is therefore inapplicable.16 MCI argued that the
liability limitation is clearly directed under the Tariff to
delays and installation and like matters involving MCI's
relations with its customers and has nothing to do with this
case, and Matrix is visibly silent on this issue in its reply
brief. And, as it happens, the arbitrator in this case does
propose to make findings and conclusions.
____________________
16 We note that, like the arbitration rules in the MCI
Tariff, the MCI/JAMS Agreement explicitly states that it covers
the arbitration of customer payment disputes over $10,000. The ______________________________________
parties seem to assume that the Agreement also applies to other
arbitrations administered by JAMS for MCI, and we likewise are
presuming its relevance here.
-20-
An additional factor reinforces the conclusion that the
provision was immaterial. "It has long been settled that
arbitrators are not required to make formal `findings of fact' to
accompany the awards they issue. Indeed, `[a]rbitrators have no
obligation . . . to give their reasons for an award at all.'"
Raytheon Co., 882 F.2d at 8 (citation omitted). See also _____________ ___ ____
Prudential-Bache Sec., Inc. v. Tanner, 72 F.3d 234, 240 n.9 (1st ___________________________ ______
Cir. 1995) ("It is well established that arbitrators are not
required to either make formal findings of fact or state reasons
for the awards they issue.") Moreover, errors in an arbitrator's
legal rulings or factual findings do not provide a basis for
reversal. See, e.g., Prudential-Bache, 72 F.3d at 239 & n.6; ___ ____ ________________
Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1253-54 (7th ________________ _________________
Cir. 1994); Advest, Inc. v. McCarthy, 914 F.2d 6, 8 (1st Cir. _____________ ________
1990). We cannot see how prohibiting a feature of arbitration
that was not guaranteed to begin with could be deemed
sufficiently material to have negated a party's willingness to
arbitrate.
Matrix also highlights various payments and "perks" that the
MCI/JAMS Agreement requires to be furnished by MCI to JAMS,
including provision of "[f]ree MCI 800 numbers," a "free MCI Mail
Account," and "[t]wo free dedicated phone lines." These
services, however, are for use in connection with the tasks JAMS
is required to provide under the contract (such as 24-hour
electronic docketing and toll-free response to inquiries from MCI
customers about arbitration), and we see nothing sinister in the
-21-
communications company contracting to provide the "tools" for the
work it seeks to obtain from its contractor, particularly when
those tools are its stock-in-trade. Likewise, the payments
specified in the MCI/JAMS Agreement are for services to be
provided, plus a $40,000 start-up fee "to cover administration
design, computer services and technical support". See App. at ___
1192-95.
Matrix knew from the outset, or should have known, that JAMS
had a substantial relationship with MCI simply by virtue of its
role as administrator of MCI's arbitration program. Matrix
should have known as well that the two parties must have spelled
out their working relationship in some form; we think it
virtually inconceivable that there would be no written contract
between them. Moreover, many of the terms that Matrix claims to
find shocking in the MCI/JAMS Agreement were included in MCI's
public request for bids for a contract to administer its
arbitration program, meaning that those aspects of MCI's
relationship with its arbitration administrator effectively were
public knowledge when Matrix entered the Agent Agreement.17
With this much reasonably presumed to be already on the
table, we are unpersuaded that the district court would have
____________________
17 For example, the MCI/JAMS Agreement requires JAMS to
provide weekly reports on the status of current arbitrations, 24-
hour electronic docketing containing any change in the status of
cases, deadlines the parties must meet and any decisions that
affect what the parties must do, a centralized case scheduling
system, and an 800 number to handle inquiries about arbitration
from MCI customers. All of these services were contained in the
bid request. See App. at 1828-1830. ___
-22-
deemed the additional information contained in the MCI/JAMS
Agreement material to Matrix's decision to participate in the
arbitration. None of the contacts between MCI and JAMS specified
in the Agreement involve the arbitrators who are deciding
cases,18 and Matrix's suggestion that any arbitrator working for
JAMS would have an inherent bias toward MCI, as JAMS' customer,
is contradicted by Matrix's explicit assurance that it did not
doubt the impartiality of the arbitrator assigned to its case.19
We consequently hold that the district court did not abuse its
discretion in denying Matrix's Rule 60(b) motion.
In sum, Judge Harrington, as the appeal is presented to us,
committed no reversible error in issuing the October 10 order
granting MCI's motion to compel arbitration, and Judge Saris did
____________________
18 In fact, the MCI/JAMS Agreement states that arbitrators
will be selected based on, among other factors, "absence of
conflicts of interest with MCI," and "demonstrated neutrality and
impartiality in professional practice". See Section XII(A). The ___
Agreement also provides:
ENDISPUTE will ensure that arbitrators serving on the
MCI panel have been screened for potential conflicts of
interest with MCI prior to inclusion on the panel.
When appointed to a particular proceeding, arbitrators
will be required to disclose any conflicts of interest
with MCI which may have developed during the interim
since the arbitrator's inclusion on the panel. In
addition, arbitrators will be screened prior to
appointment to a particular arbitration for potential
conflicts with the MCI customer who is a party to the
case.
Id. at (C). ___
19 The arbitrator is the Honorable Robert L. Steadman,
former chief justice of the Massachusetts Superior Court.
-23-
not abuse her discretion in rejecting a new trial under Fed. R.
Civ. P. 60(b).
Their judgments accordingly are affirmed. Each party to __________________________________________ ______________
bear its own costs. ___________________
-24-
Document Info
Docket Number： 96-2246
Filed Date： 1/29/1998
Precedential Status： Precedential
Modified Date： 9/21/2015