The Householder Grp v. Caughran , 354 F. App'x 848 ( 2009 )


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  •          IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT  United States Court of Appeals
    Fifth Circuit
    FILED
    November 20, 2009
    No. 09-40111                      Charles R. Fulbruge III
    Summary Calendar                            Clerk
    THE HOUSEHOLDER GROUP; SCOTT ALLEN HOUSEHOLDER;
    STEPHEN M HORVATH; TODD ALLEN BERGERON,
    Plaintiffs–Appellees
    v.
    THOMAS CAUGHRAN,
    Defendant–Appellant
    Appeal from the United States District Court
    for the Eastern District of Texas
    USDC No. 4:07-CV-316
    Before HIGGINBOTHAM, CLEMENT, and SOUTHWICK, Circuit Judges.
    PER CURIAM:*
    Thomas Caughran appeals the district court’s confirmation of an
    arbitration award in favor of the plaintiffs (collectively “Householder Group”).
    Householder Group has failed to file a brief.             However, Caughran has not
    demonstrated that there is a sufficient statutory basis for vacating the
    arbitration award. Therefore, 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 R. 47.5, the court has determined that this opinion should not be
    published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
    No. 09-40111
    BACKGROUND
    The full set of background facts for this matter can be found in the district
    court’s opinion affirming the arbitration award. See Householder Group v.
    Caughran, 
    576 F. Supp. 2d 796
     (E.D. Tex. 2008). To summarize, a panel of
    arbitrators with the National Association of Securities Dealers, Inc. (“NASD”)
    awarded Householder Group $39,500 in compensatory damages for breach of a
    promissory note, $50,000 in compensatory damages for breach of a Branch Office
    Agreement, and $70,000 in attorneys fees. Thereafter, Householder Group filed
    a motion in the district court to confirm the award, and Caughran filed a motion
    for vacatur.1
    On September 17, 2008, the district court granted Householder Group’s
    motion, denied Caughran’s motion, and confirmed the arbitration award.
    Subsequently, Caughran filed this pro se appeal contending that the district
    court erred by denying his motion to vacate and by confirming the award.
    DISCUSSION
    The Federal Arbitration Act (“FAA”) imposes significant limits on judicial
    review in order that arbitration will be “efficient and cost-effective” for the
    parties. Positive Software Solutions, Inc. v. New Century Mortg. Corp., 
    476 F.3d 278
    , 280 (5th Cir. 2007) (en banc). Although we review the confirmation of an
    arbitration award de novo, we use the same standard as the district court to
    determine whether the award should have been confirmed. See Am. Laser
    Vision, P.A. v. Laser Vision Inst., L.L.C., 
    487 F.3d 255
    , 258 (5th Cir. 2007),
    overruled on other grounds, 
    128 S. Ct. 1396
     (2008). The effect is to make judicial
    review of an arbitration award “exceedingly deferential,” and vacatur is
    1
    Caughran proceeded pro se during the arbitration and before the district court.
    2
    No. 09-40111
    available only for the limited reasons outlined in Section 10(a) of the FAA. See
    id.; 
    9 U.S.C. § 10
    .
    Since Caughran proceeds on this appeal pro se, the arguments in his brief
    will be liberally construed. See Erickson v. Pardus, 
    551 U.S. 89
    , 94 (2007).
    An arbitration award must be confirmed unless the court determines the
    award should be vacated under Section 10, or modified or corrected under
    Section 11, of the FAA. Hall Street Assocs., L.L.C. v. Mattel, Inc., 
    128 S. Ct. 1396
    , 1402 (2008). Arbitration awards can no longer be vacated on nonstatutory,
    common law grounds. See Citigroup Global Markets, Inc. v. Bacon, 
    562 F.3d 349
    , 358 (5th Cir. 2009) (interpreting Hall Street, 
    128 S. Ct. 1396
    ). Thus,
    Section 10 provides the exclusive grounds for vacatur. Hall Street, 
    128 S. Ct. at 1402
    .
    Pursuant to Section 10(a) of the FAA, there are only four grounds for
    which a court can vacate an arbitration award:
    (1) [W]here the award was procured by corruption, fraud, or undue
    means;
    (2) [W]here there was evident partiality or corruption in the
    arbitrators, or either of them;
    (3) [W]here 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) [W]here 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.
    3
    No. 09-40111
    
    9 U.S.C. § 10
    (a). Notably, Section 10(a) does not provide for vacatur of an
    arbitration award based on the merits of a party’s claim. Although most of
    Caughran’s brief discusses the merits of various claims, we do not have authority
    to conduct a review of an arbitrator’s decision on the merits. Kergosien v. Ocean
    Energy, Inc., 
    390 F.3d 346
    , 357 (5th Cir. 2004), overruled on other grounds, 
    562 F.3d 349
     (5th Cir. 2009); see also Major League Baseball Players Ass’n v. Garvey,
    
    532 U.S. 504
    , 509 (2001). Thus, Caughran’s arguments concerning the merits
    are irrelevant to our determination of whether there are statutory grounds
    within Section 10(a) under which the arbitration award should be vacated.
    Caughran does not specifically allege that the arbitration award should be
    vacated due to one or more of the four reasons outlined in Section 10(a) of the
    FAA. However, by liberally construing his brief, it appears that he alleges the
    award should be vacated under either Section 10(a)(2) or (3).
    Caughran claims he did not receive a fair hearing because the panel
    prohibited him from introducing certain evidence. For example, he alleges that
    he was not allowed to call several witnesses who would have substantiated his
    claims.   He also alleges that the panel would not allow him to admit
    conversations he taped, or “transcripts” 2 of them, between himself and the
    plaintiff Stephen Horvath. Caughran claims that these taped conversations
    demonstrate that Horvath committed perjury. However, these allegations do not
    warrant vacatur of the arbitration award pursuant to Section 10(a)(3).
    As the district court correctly explained in its opinion confirming the
    arbitration award:
    2
    The district court noted that these “transcripts” were merely summaries of the
    conversations. Householder Group, 
    576 F. Supp. 2d at 802
    .
    4
    No. 09-40111
    The arbitrator is not bound to hear all of the evidence tendered by
    the parties; however, he must give each of the parties to the dispute
    an adequate opportunity to present its evidence and argument. An
    evidentiary error must be one that is not simply an error of law, but
    which so affects the rights of a party that it may be said that he was
    deprived of a fair hearing.
    Householder Group, 
    576 F. Supp. 2d at 802
     (citations and internal quotations
    omitted).   However, even assuming, arguendo, that the panel erred in
    prohibiting Caughran from making these admissions, he has not demonstrated
    that such alleged errors rose to the level of depriving him of a fair hearing.
    Caughran has not submitted any affidavits from the allegedly material
    witnesses he claims he was not allowed to call during the arbitration. In the
    absence of this, or other similar evidence, Caughran cannot demonstrate that an
    error in permitting these witnesses to testify deprived him of a fair hearing.
    Similarly, prohibiting Caughran from admitting the tapes or transcripts of his
    conversations with Horvath did not deprive Caughran of a fair hearing. Horvath
    testified at the arbitration hearing. Thus, Caughran had the opportunity to
    cross-examine him on the perjury allegations.        Accordingly, we find that
    Caughran has not carried his burden of demonstrating that vacatur is warranted
    under Section 10(a)(3).
    In addition, Caughran makes frequent accusations in his brief that the
    arbitration panel was actually biased. To establish evident partiality based on
    actual bias, the party urging vacatur must produce specific facts from which “a
    reasonable person would have to conclude that the arbitrator was partial to one
    party.” Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 
    455 F. Supp. 2d 545
    ,
    550 (N.D. Tex. 2006) (citations and internal quotations omitted). This is an
    “onerous burden,” because the urging party must demonstrate that the alleged
    5
    No. 09-40111
    partiality is “direct, definite, and capable of demonstration rather than remote,
    uncertain or speculative.” 
    Id.
     (citation and internal quotations omitted).
    Liberally construing Caughran’s brief, it appears that he claims the panel
    demonstrated actual bias in the following ways: (1) the panel refused to force
    Householder Group to comply with the panel’s discovery orders; (2) the panel’s
    rulings were one-sided and against Caughran; (3) the panel wanted him to lose
    despite overwhelming evidence favoring Caughran; and (4) the panel awarded
    $50,000 for the breach of the Branch Office Agreement in order to punish
    Caughran for filing forty motions for evidence.
    Despite these allegations, Caughran does not produce specific facts needed
    to meet his “onerous burden” of establishing that the alleged arbitrator partiality
    was “direct, definite, and capable of demonstration.” Weber, 
    455 F. Supp. 2d at 550
    . Thus, we are left with nothing more than speculative assertions in his
    brief, which are insufficient to establish that vacatur is warranted under Section
    10(a)(2). See 
    id.
     Accordingly, we find that Caughran has not carried his burden
    of demonstrating that vacatur is warranted under Section 10(a)(2).
    We also note that based on the Supreme Court’s recent decision in Hall
    Street, “manifest disregard of the law is no longer an independent ground for
    vacating arbitration awards under the FAA.”         Citigroup, 
    562 F.3d at 350
    (interpreting Hall Street, 
    128 S. Ct. 1396
    ). Therefore, Caughran’s claim that the
    arbitration award should be vacated due to manifest disregard for the law is
    without merit.
    Finally, in response to Caughran’s allegations that his Seventh
    Amendment rights were violated, we note that the Seventh Amendment right
    to a jury trial is limited by a valid arbitration provision. Am. Heritage Life Ins.
    6
    No. 09-40111
    Co. v. Orr, 
    294 F.3d 702
    , 711 (5th Cir. 2002). If claims are properly before an
    arbitral forum pursuant to an arbitration agreement, then the Seventh
    Amendment right to a jury trial vanishes. 
    Id.
     This dispute was properly before
    a panel of NASD arbitrators pursuant to the terms of the promissory note signed
    by Caughran. Therefore, Caughran’s claim that his Seventh Amendment right
    to a jury trial was violated is without merit.
    AFFIRM.
    7