Brenda Shipley v. Graphlogic, Inc. (2010)

MEMORANDUM OF DECISION RE SHIPLEY'S APPLICATION TO CONFIRM ARBITRATION AWARD, MEMORANDUM OF DECISION RE GRAPHLOGIC, INC'S. APPLICATION TO VACATE OR MODIFY ARBITRATION AWARD

The undersigned having heard and considered the evidence, both testimonial and documentary, and the oral and written arguments of counsel, does make the following findings of fact and conclusions of law.

FINDINGS OF FACT:

1. On June 24, 2006 Ms. Brenda Shipley signed an Employment Agreement with Graphlogic, Inc., hereinafter:  “GL,” that contained, inter alia, a provision that “any dispute under this Agreement, including any dispute as to cause or good reason for termination, shall be submitted to binding arbitration subject to the rules of the American Arbitration Association ․” Section Fourteen:  Arbitration, of Shipley's Exhibit 4.

2. During the term of the Employment Agreement a dispute arose between the parties to the aforementioned Employment Agreement.

3. By agreement of the parties said dispute was submitted to arbitration as provided by the Employment Agreement, proceedings were held in connection with the arbitration and an Arbitration Award was issued on June 1, 2009.

4. An Application to Vacate or Modify the Arbitration Award, hereinafter the “Award,” was timely filed by GL and An Application to Confirm the Arbitration Award was timely filed by Ms. Brenda Shipley, hereinafter “Shipley.”

5. GL filed an August 31, 2009 Plaintiff's Amended Memorandum of Law for Application to Vacate or Modify an Arbitration Award detailing the amended basis for it's application (note that GL had previously filed an August 3, 2009 Memorandum of Law in support of it's Application) to vacate or modify the Award.

6. GL's reasons to vacate or modify the Award are:

a. the arbitrator misconduct arising out of a failure to postpone the arbitration proceedings;

b. the arbitrator engaged in evident partiality;

c. the arbitrator exceeded his powers;

d. the Award was procured by corruption and undue means;  or

e. the Award violates public policy (see page 3 of GL's 8-31-09 Memorandum).

Alternatively, GL moves the court to correct or modify the Award pursuant to CGS 52-419.

7. Shipley denies UL's assertions and moved to confirm the Award pursuant to CGS 52-417.

8. There was no unreasonable denial of a request for postponement or continuance.   On July 18, 2008 GL requested a six-month postponement.   Shipley agreed to a one-month postponement, but objected to a six month postponement.   Though the arbitrator denied GL's request for a six-month postponement, he did extend for approximately 7 weeks GL's obligation to respond to Shipley's pending motion for summary judgment as to part of the arbitration claim and eventually scheduled the arbitration hearings to begin in mid-January 2009, effectively granting the requested six-month postponement of the arbitration proceeding.

9. Additionally, the essence of GL's postponement request was that its' counsel in the arbitration proceeding, Attorney June Gold, was the spouse of the founder of Graphlogic, Inc., Steven Gold, and that Stephen Gold unexpectedly and tragically died on July 4, 2008.   Consequently Attorney Gold reports that she was “unwillingly thrust into a most unique and extraordinary legal position” as she was “counsel for the (GL), key witness for (GL) and sole executive representative of (GL),” see page 6 of GL's 8-31-09 Memorandum.

10. GL did not offer evidence of any attempt to obtain replacement counsel.   GL did not offer evidence that it requested any additional continuance or “postponement” from the arbitrator when the continuance/postponement that was granted was about to expire.   GL offered no evidence that the arbitrator's ruling prejudiced or damaged GL's rights.

11. GL failed to establish evident partiality by the arbitrator.   GL offered no persuasive evidence in support of this claim.   GL's counsel's retrospective analysis of the arbitrator's procedural rulings as indicative of evident partiality is legally insufficient to sustain this element of proof, see GL's 8-31-09 Memorandum, page 10-15.

12. The arbitrator did not exceed his powers.   The Arbitration provision of the Employment Agreement provides:

“A) Any dispute under this Agreement, including any dispute as to cause or good reason for termination, shall be submitted to binding arbitration subject to the rules of the American Arbitration Association.   EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTIONS, SUIT OR PROCEEDING.   The Company shall bear all costs associated with the Arbitration, including filing fees and any stipend for the arbitrator.   The Company and the Employee shall each bear its own attorneys fees.

B) Nothing in this section shall be read to preclude the Company seeking injunctive relief for the Employee's breach of Section 8, Proprietary and Trade Secret Information or Section 9, Covenant Not to Compete.”

13. Shipley submitted an April 4, 2008 seven-count Amended Complaint with the American Arbitration Association, hereinafter “AAA” with a copy to Attorney Gold as counsel for GL, the parties addressed those claims in their evidentiary submissions and respective memoranda addressed to the arbitrator and the arbitrator's Award of June 1, 2009 tracks the claims found in that Amended Complaint and awards relief sought in accordance with the Claims for Relief described in the Amended Complaint.

14. The Award conformed to the Submission.

15. There was no credible evidence that the Award was procured by fraud, corruption, undue means or corruption on the part of the arbitrator.   None of the documentary evidence offered by GL proved that the award was procured by fraud, corruption or undue means, or that there was corruption on the part of the arbitrator.   GL offered no testimonial evidence in connection with the application to vacate or correct the Award.

16. GL failed to prove that the Award is in manifest disregard of the law as GL has not established that the award contains an error that is obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator, that the arbitrator appreciated the existence of a clearly governing legal principle but decided to ignore it, and, the governing law was well defined, explicit and clearly applicable.

17. As noted above, GL prosecuted its Application to Vacate and/or Modify using only documentary evidence and no testimonial evidence.   The documentary evidence offered was insufficient to establish the legal elements of ‘manifest disregard of the law,’ noted in the preceding paragraph, necessary to vacate or modify an arbitration award pursuant to Connecticut's General Statutes.

18. Shipley's Application to Confirm the Award, timely filed, must be granted, pursuant to CGS section 52-417, which states in pertinent part:  “(T)he court or judge shall (italics added, ed.) grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in section 52-418 and 52-419(.).”

LEGAL RATIONALE

“Judicial review of arbitral decisions is narrowly confined ․ When the parties agree to arbitration and establish the authority of the arbitrator through the terms of their submission, the extent of our judicial review of the award is delineated by the scope of the parties' agreement ․ When the scope of the submission is unrestricted, the resulting award is not subject to de novo review even for errors of law so long as the award conforms to the submission ․ Because we favor arbitration as a means of settling private disputes, we undertake judicial review of arbitration awards in a manner designed to minimize interference with an efficient and economical system of alternative dispute resolution ․

“Where the submission does not otherwise state, the arbitrators are empowered to decide factual and legal questions and an award cannot be vacated on the grounds that ․ the interpretation of the agreement by the arbitrators was erroneous.   Courts will not review the evidence nor, where the submission is unrestricted, will they review the arbitrators decision of the legal questions involved ․ In other words, [u]nder an unrestricted submission, the arbitrators' decision is considered final and binding;  thus the courts will not review the evidence considered by the arbitrators nor will they review the award for errors of law or fact ․

“Even in the case of an unrestricted submission, we have recognized three grounds for vacating an award:  (1) the award rules on the constitutionality of a statute ․ (2) the award violates clear public policy ․ [and] (3) the award contravenes one or more of the statutory proscriptions of § 52-418 ․ [Section] 52-418(a)(4) provides that an arbitration award shall be vacated if the arbitrators have exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.

“In our construction of § 52-418(a)(4), we have, as a general matter, looked to a comparison of the award with the submission to determine whether the arbitrators have exceeded their powers.”  (Internal quotation marks omitted.)  Harty v. Cantor Fitzgerald & Co., 275 Conn. 72, 80-81, 881 A.2d 139 (2005).   The standard for reviewing a claim that the award does not conform to the submission requires what we have termed “in effect, de novo judicial review.”  Id. at 84, 881 A.2d 139.  “Although we have not explained precisely what ‘in effect, de novo judicial review’ entails as applied to a claim that the award does not conform with the submission ․ [o]ur inquiry generally is limited to a determination as to whether the parties have vested the arbitrators with the authority to decide the issue presented or to award the relief conferred.”  Id. at 85, 881 A.2d 139.

“In determining whether an arbitrator has exceeded the authority granted under the contract, a court cannot base the decision on whether the court would have ordered the same relief, or whether or not the arbitrator correctly interpreted the contract.   The court must instead focus on whether the [arbitrator] had authority to reach a certain issue, not whether that issue was correctly decided.   Consequently, as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of authority, the award must be enforced.   The arbitrator's decision cannot be overturned even if the court is convinced that the arbitrator committed serious error.”   (Internal quotation marks omitted.)  Id. at 86 n.7. 881 A.2d 139, quoting 1 M. Domke, Commercial Arbitration (3d Ed.2003) § 39:6, pp. 39-12 through 39-13.   Moreover, “[e]very reasonable presumption and intendment will be made in favor of the award and of the arbitrator's acts and proceedings.   Hence, the burden rests on the party challenging the award to produce evidence sufficient to show that it does not conform to the submission.”  Bic Pen Corp. v. Local No. 134, 183 Conn. 579, 585, 440 A.2d 774 (1981).

“Such a limited scope of judicial review is warranted given the fact that the parties voluntarily bargained for the decision of the arbitrator and, as such, the parties are presumed to have assumed the risks of and waived objections to that decision ․ It is clear that a party cannot object to an award which accomplishes precisely what the arbitrators were authorized to do merely because that party dislikes the results.”  (Internal quotation marks omitted.)  Industrial Risk Insurers v. Hartford Steam Boiler Inspection & Ins. Co., 258 Conn. 101, 110, 779 A.2d 737 (2001).

Comprehensive Orthopaedics and Musculoskeletal Care, LLC v. Axtmayer, 293 Conn. 748, 753-56, 980 A.2d 297 (Conn.) 2009.

In the instant case the parties voluntarily contracted to resolve “any dispute under this Agreement,” Shipley Ex. 4, that is:  arising out of the employment relationship, via binding arbitration.   In effect, they agreed to an unrestricted submission of any dispute under the employment contract would be decided in arbitration.

Shipley filed a complaint, later an Amended Complaint, alleging various claims arising out of the employment relationship.   GL responded to the Amended Complaint.   The parties selected an arbitrator.   The parties complied with the AAA arbitration rules to frame the issues and engage in discovery just as their Employment Agreement prescribed.   The parties agreed to be bound by the preliminary and procedural rulings of their agreed upon arbitrator.   The parties participated in the evidentiary proceedings before their agreed upon arbitrator.   The arbitrator timely decided their disputes.

The Award rejects several of Shipley's claims for relief and accepts several of Shipley's claims.   However, most importantly, the Award responds to each and every claim and defense within the Submission of the parties.

Though GL is unsatisfied with the conclusions reached by the arbitrator, as noted by the Connecticut Supreme Court in their most recent decision bearing on this topic and decided in October of 2009, judicial review of arbitration awards is extremely narrow.   GL is not able to establish that it is entitled to any judicial relief from the arbitration proceeding that GL included in its employment contract with Shipley or from the Award arising out of the arbitration proceeding.   The Award conformed to the Submission:  that is, the Award responded to the issues submitted by the parties and the issues submitted were within the scope of the Arbitration Agreement.

GL's claim that the arbitrator's award of attorneys fees to Shipley is outside the scope of the submission is incorrect.   The award of attorneys fees was based on relief authorized by Connecticut statutes applicable to the various claims of Shipley and not based on any contractual right found in the Employment Agreement.   Had the arbitrator decided to ignore the statutory remedies found applicable to Shipley's claims, Shipley might have a colorable claim for vacating the award as the arbitrator had manifestly disregarded Connecticut law.   However, the arbitrator did not ignore the Shipley's statutory remedies and instead found those remedies available to Shipley, including but not limited to, an award of attorneys fees for certain statutory violations.

GL has not established that the arbitrator exceeded his powers by manifestly disregarding Connecticut law, which the Supreme Court in Axtmayer distinguished from ‘serious error,’ see footnote 8 of the decision.  ‘Manifest disregard’ is defined by a three-pronged test, Garrity v. McCaskey, 223 Conn. 1, 9, 612 A.2d 742 (1992), as noted above in Findings of Fact paragraph 16.   Manifest disregard of the law requires an award that contains an error that is obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator, that the arbitrator appreciated the existence of a clearly governing legal principle but decided to ignore it, and, the governing law was well defined, explicit and clearly applicable.  “In order to prevail, the defendant (the movant on the Application to Vacate-i.e. GL in the instant case) must demonstrate that the award reflects an egregious or patently irrational rejection of clearly controlling legal principles(.),” Garrity v. McCaskey, supra, p. 11.   GL has failed to demonstrate such an award.   GL raises ‘manifest disregard’ in connection with the arbitrator's factual determination of the applicability of several statutes to this dispute.   The court will not overturn factual findings of the arbitrator unless the movant demonstrated the findings were without evidentiary support.   No complete record and transcript of the arbitration proceeding was provided and therefore the movant, GL, failed to meet that burden of proof that no evidentiary support existed for such findings in this case.

Lastly GL moves that the Award be vacated because the same violates a clear public policy.   GL fails to prove that the Award violates a clear public policy.   GL identifies three concepts that GL claims are ‘clear public policies.’   First, GL offers no legal authority for the proposition that the three concepts it identifies are ‘clear public policies' within the context and meaning of this area of law.   Secondly, if these concepts were ‘clear public policies,’ within the context and meaning of vacatur of arbitration awards, there is no showing that the instant Award violated these ‘policies.’

GL has vigorously contested this employment dispute at each and every stage.   GL has exercised its contractual rights to proceed to arbitration, to have Shipley's claims tested-and several found legally insufficient-and to have its' defenses tested.

Both counsel prepared voluminous exhibits, exhaustive and thorough legal memorandum and zealously advocated their respective client's legal positions.   The parties have had their day in both the arbitration forum and now in the judicial forum.   Their claims have been carefully examined and considered in the broad perspective of the arbitration proceeding and in the narrow scope of judicial review of an unrestricted submission in a voluntary arbitration.

CONCLUSIONS OF LAW

After careful examination of the Award of Arbitrator, the evidence presented and the excellent legal memorandum of counsel, I cannot identify one aspect of the Award that exceeded the arbitrator's authority, resulted from fraud, corruption or other misconduct by any participant nor can I find that the Award resulted from a manifest disregard of the law or that the award violated a clear public policy or that there is a basis for vacatur or modification pursuant to either CGS 52-418 or 52-419.

Therefore, the Final Award must be confirmed in its entirety.

Wherefore, the Court orders:

Graphlogic Incorporated's June 22, 2009 Application to Vacate or Modify An Arbitration Award, specifically the June 1, 2009 Award of Arbitrator in the Matter of Brenda Shipley, claimant, and Graphlogic, Inc., respondent, decided by AAA arbitrator Stephen Ruffino, Esq., is denied.

Brenda Shipley's June 4, 2009 Application to Confirm the above-described arbitration award is confirmed.

ZEMETIS, TERENCE A., J.

Zemetis, Terence A., J.