Troy W. Windham v. Doctor's Associates, Inc. (2012)

MEMORANDUM OF DECISION RE Application to Vacate Arbitration Award (# 101)

The plaintiff, Troy Windham, is a franchisee operating a Subway restaurant in Delaware pursuant to a franchise agreement executed with the defendant franchisor, Doctor's Associates, Inc. On December 19, 2011, this court granted the defendant's motion to consolidate the present action, Windham v. Doctor's Associates, Inc., Docket No. CV 10 6004162, in which the plaintiff seeks to vacate an arbitration award, with Doctor's Associates, Inc. v. Windham, Docket No. CV 10 6004271, in which the defendant in the present case sought to confirm the same award pursuant to General Statutes § 52–417.

The plaintiff claims that the arbitration hearing proceeded without his knowledge or participation on July 14, 2010.   He claims that the defendant's counsel had a duty to disclose to the arbitrator certain “adverse facts” at the ex parte proceeding, pursuant to our rules of professional conduct.   Because the defendant's counsel did not do so, the plaintiff asks this court to vacate the arbitration award pursuant to General Statutes § 52–418(a)(1) on the ground that it was “procured by corruption, fraud or undue means.” ¹

The court finds the following facts and procedural history are relevant to the plaintiff's application to vacate the arbitration award.   The plaintiff operated two stores, denominated as stores # 6109 and # 11581, under two separate franchise agreements.   The defendant claimed that the plaintiff violated the terms of his franchise agreements concerning certain “decor upgrades” and it sought to terminate his franchise agreements.   The agreements between the parties' required that disputes between them “arising out of or relating to the [a]greement or breach thereof” would be settled by arbitration.   The plaintiff retained Connecticut counsel regarding the dispute concerning # 11581 and he testified at the hearing regarding that store.   On June 16, 2010, an arbitrator ruled in the plaintiff's favor in that dispute, concluding that he was excused from timely performing the decor upgrades.

Although the plaintiff's counsel had also contacted the defendant during pre-arbitration negotiations concerning store # 6109, counsel did not enter a formal “appearance” ² with the case manager from the America Dispute Resolution Center, Inc. (ADRC) with respect to that matter.   He attests in his affidavit that he was not receiving any notices from the ADRC concerning any arbitration proceedings for # 6109.   The plaintiff's counsel attests further that his correspondence with the defendant led him to believe that the dispute concerning this store was being resolved.   The plaintiff does not dispute the defendant's evidence that the plaintiff personally received notices from the ADRC concerning the defendant's request for arbitration concerning store # 6109, including a March 22, 2010, formal notice of hearing with a hearing date scheduled for July 14, 2010, and a notice dated July 7, 2010, indicating that the defendant had filed documents in advance of the scheduled arbitration.³  Nonetheless, the plaintiff attests in his affidavit that he believed that the parties were engaged in ongoing discussions and that the formal hearing would not go forward.   On July 14, 2010, pursuant to ADRC's rules,⁴ the formal arbitration hearing went forward without the presence of either the plaintiff or his counsel.   The arbitrator found that the plaintiff had been sent “adequate and proper notice” and rendered an award in the defendant's favor, terminating the plaintiff's franchise agreement with respect to store # 6109.

“When arbitration is created by contract, [our courts] recognize that its autonomy can only be preserved by minimal judicial intervention ․ Because the parties themselves, by virtue of the submission, frame the issues to be resolved and define the scope of the arbitrator's powers, the parties are generally bound by the resulting award ․ Since the parties consent to arbitration, and have full control over the issues to be arbitrated, a court will make every reasonable presumption in favor of the arbitration award and the arbitrator's acts and proceedings ․ The party challenging the award bears the burden of producing evidence sufficient to invalidate or avoid it, and only upon a showing that it falls within the proscriptions of § 52–418 5 of the General Statutes, or procedurally violates the parties' agreement will the determination of an arbitrator be subject to judicial inquiry.”  (Citations omitted;  internal quotation marks omitted.)  O & G/O'Connell Joint Venture v. Chase Family Ltd. Partnership No. 3, 203 Conn. 133, 145–46, 523 A.2d 1271 (1987).   An arbitration award may not be set aside on a mere showing that the complaining party, or even the court, would have decided the matter differently.  Von Langendorff v. Riordan, 147 Conn. 524, 528, 163 A.2d 100 (1960).

The plaintiff's position is that the behavior of defendant's counsel in the ex parte hearing requires this court to vacate the award.   In support thereof, the plaintiff submitted to the court a transcript of the deposition testimony of Attorney Jeffrey Allen, the defendant's counsel who participated in both arbitration proceedings concerning this plaintiff.⁶  The plaintiff claims that Attorney Allen failed to disclose to the arbitrator the following adverse facts known to him at the time.   He did not disclose the existence of the prior arbitration with respect to store # 11581, which involved similar issues and was decided in the plaintiff's favor less than one month before the formal hearing on store # 6109.   He failed to disclose that the plaintiff had contested that termination.   He did not disclose that the plaintiff had retained counsel with respect to # 6109 who had engaged in negotiations with the defendant concerning that store.   Finally, he failed to disclose that the plaintiff had a defense to his failure to perform timely the required decor upgrades, which was that the defendant had failed to provide to the plaintiff certain required design approvals in a timely manner.⁷  The plaintiff maintains that Attorney Allen had a duty to make these disclosures pursuant to Rule 3.3(d) of our Rules of Professional Conduct,⁸ and that his failure to do so merits a finding by this court that the arbitration award was procured at the ex parte hearing by “undue means” under § 52–418(a)(1).   The plaintiff cites no authority for his stated position that “undue means” is a less demanding standard than requiring a showing of “corruption” or “fraud” as those terms are used in the statute.⁹

The defendant argues in response that “undue means” had to be read in conjunction with the words “corruption” and “fraud” and as requiring proof of intentional misconduct.   The defendant also responds to arguments that the plaintiff made as to whether the arbitrator in the present case might have given res judicata or collateral estoppel effect to the arbitration concerning a different store.   See, e.g., Stratford v. International Ass'n. of Firefighters, AFL–CIO, Local 998, 248 Conn. 108, 132, 728 A.2d 1063 (1999) (holding that arbitrators may, but are not required to, apply collateral estoppel to prior arbitration awards, and are “entitled to use their own independent judgment, for which the parties bargained, to decide the issues properly before them”).

In commenting on § 52–418(a), the author of the Connecticut Practice Series states that “[t]here is sparse authority interpreting the first ground (procuring an award by corruption, fraud or undue means).”   D. Rosengren, 13 Connecticut Practice Series:  Connecticut Construction Law (2005) § 9:11, Vacating Award, (2005).   The author cites O & G/O'Connell Joint Venture v. Chase Family Ltd. Partnership No. 3, supra, 203 Conn. 156.   In that case, the defendants claimed that the plaintiff “manipulated the proceedings by waiting until it submitted its post-hearing brief to raise [a particular claim for damages].”  Id., 155.   The Supreme Court concluded that it was clear from the record that the defendants “had sufficient notice of that claim, as well as a full opportunity to address it.   We conclude that there is no evidence whatsoever that the plaintiff procured the award by undue means.”  Id., 156.   See also Alexandru v. Cappalli, 82 Conn.App. 432, 434, 844 A.2d 914 (2004) (per curiam opinion affirming trial court decision that plaintiff had failed to prove award had been procured by corruption, fraud or undue means);  Waterbury City Employees Ass'n. v. Waterbury Financial Planning & Assistance Board, Superior Court, judicial district of Waterbury, Docket No. CV 06 4010047 (February 22, 2007, Gilligan, J.) (42 Conn. L. Rptr. 880, 888–89) (interpreting “procured by undue means” ground for vacating an award).

In view of the sparse Connecticut legal authority interpreting the “procured by undue means” ground for vacating an award, it is appropriate to look to other authorities to assist with the analysis.  Waterbury City Employees Ass'n. v. Waterbury Financial Planning & Assistance Board, supra, 42 Conn. L. Rptr. 888.   Our Supreme Court regularly finds that federal cases pertaining to nearly identical provisions in the Federal Arbitration Act, 9 U.S.C. § 10, are instructive in analyzing § 52–418.   See, e.g., Bridgeport v. The Kasper Group, Inc., 278 Conn. 466, 475–76, 899 A.2d 523 (2006).   The federal act provides, in relevant part:  “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 ․” 9 U.S.C. § 10(a).

“In Paine Webber Group, Inc. v. Zinsmeyer Trusts Partnership, 187 F.3d 988 (8th Cir.1999), [cert. denied, 529 U.S. 1020 (2000),] where one party had withheld documents from discovery, the 8th Circuit Court reversed the decision of the District Court to vacate the award as having been procured by undue means.   The Court held that the phrase ‘undue means' had to be read in conjunction with the words ‘corruption’ and ‘fraud’ that preceded it and that ‘[c]onsistent with the plain meaning of fraud and corruption, and with the limited scope of judicial review of arbitration awards, other circuits have uniformly construed the term undue means as requiring proof of intentional misconduct.’   See American Postal Workers Union, AFL–CIO v. United States Postal Service, 52 F.3d 359, 362 (D.C.Cir.1995) (undue means limited to conduct ‘equivalent in gravity to corruption or fraud, such as a physical threat to an arbitrator’);  A.C. Edwards & Sons, Inc. v. McCollough, 967 F.2d 1401, 1403 (9th Cir.1992) (undue means ‘connotes behavior that is immoral if not illegal’), cert. denied, 506 U.S. 1050 (1993);  Shearson Hayden Stone, Inc. v. Liang, 493 F.Sup. 104, 108 (N.D.Ill.1980) (‘undue means' requires some type of bad faith in the procurement of the award), aff'd, 653 F.2d 310 (7th Cir.1981).  Id., 991.”  (Citations omitted;  internal quotation marks omitted.)  Waterbury City Employees Ass'n. v. Waterbury Financial Planning & Assistance Board, supra, 42 Conn. L. Rptr. 888–89.   See also National Casualty Co. v. First State Ins. Group, 430 F.3d 492, 499 (1st Cir.2005) (“[t]he best reading of the term ‘undue means' ․ is that it describes underhanded or conniving ways of procuring an award that are similar to corruption or fraud, but do not precisely constitute either”).

Even if the court accepts the proposition that the defendant's attorney failed in his duty of full candor before the tribunal by failing to disclose facts that the plaintiff believes were material and adverse to the defendant's position, the plaintiff has not met his burden to demonstrate that the award was procured by “undue means.”   There has been no showing that the defendant's attorney acted intentionally in bad faith to conceal these facts from the arbitrator, or that he otherwise used underhanded, immoral, or conniving means in order to procure the award.¹⁰  The plaintiff's remaining arguments—for example, that the arbitrator could have given collateral estoppel effect to the prior arbitration award, had he known about it—simply are not sufficient to invalidate or avoid the award because they do not fall within the proscriptions of § 52–418.   Rather, the plaintiff attempts to advance arguments before this court that he could have advanced before the arbitrator, had he not been absent from the arbitration proceeding.   Although it is troubling that the award was procured without the plaintiff's participation, the arbitrator found that the plaintiff had been sent “adequate and proper notice,” and there is no serious dispute that he, in fact, received said notice.   In light of the court's limited role in the review of arbitral awards, the plaintiff's failure to demonstrate that the award was procured by “undue means” is fatal to his application to vacate the award.

Section 52–417 provides, in pertinent part, “[a]t any time within one year after an award has been rendered and the parties to the arbitration notified thereof, any party to the arbitration may make application to the superior court for the judicial district in which one of the parties resides ․ to any judge thereof, for an order confirming the award.   The court or judge shall grant such an order confirming the award unless the award is vacated, modified or corrected as prescribed in Sections 52–418 and 52–419.”   The defendant timely made such application.

For all the above reasons, the plaintiff's application to vacate the arbitration award is denied, and the defendant's objection thereto is sustained.

The defendant's application to confirm the arbitration award terminating the franchise agreement is granted.  General Statutes § 52–420(c).

Maureen M. Keegan, J.

FOOTNOTES

FN1. In his application to vacate the award, the plaintiff lists additional grounds.   First, he claims that the arbitrator erred by “refusing to postpone the hearing upon sufficient cause shown ․” within the meaning of General Statutes § 52–418(a)(3).   Because he did not attend the hearing, he did not request postponement then, and the record does not disclose that he requested postponement at any time prior thereto.   Second, he claims that the arbitrator “exceeded [his] powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made” within the meaning of § 52–418(a)(4).   Finally, he claims that “enforcing the [a]ward would be manifestly unjust and in violation of public policy, and it would deprive [the plaintiff] of due process.”   Our appellate courts routinely decline to review claims that have been “asserted in the statement of issues but thereafter [receive] only cursory attention in the brief without substantive discussion or citation of authorities ․” and our Supreme Court has observed that “[t]hese same principles apply to claims raised in the trial court.  (Internal quotation marks omitted.)  Connecticut Light & Power Co. v. Department of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003).   The plaintiff did not address these additional grounds for vacating the award at all in his brief.   The court deems them to have been abandoned..  FN1. In his application to vacate the award, the plaintiff lists additional grounds.   First, he claims that the arbitrator erred by “refusing to postpone the hearing upon sufficient cause shown ․” within the meaning of General Statutes § 52–418(a)(3).   Because he did not attend the hearing, he did not request postponement then, and the record does not disclose that he requested postponement at any time prior thereto.   Second, he claims that the arbitrator “exceeded [his] powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made” within the meaning of § 52–418(a)(4).   Finally, he claims that “enforcing the [a]ward would be manifestly unjust and in violation of public policy, and it would deprive [the plaintiff] of due process.”   Our appellate courts routinely decline to review claims that have been “asserted in the statement of issues but thereafter [receive] only cursory attention in the brief without substantive discussion or citation of authorities ․” and our Supreme Court has observed that “[t]hese same principles apply to claims raised in the trial court.  (Internal quotation marks omitted.)  Connecticut Light & Power Co. v. Department of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003).   The plaintiff did not address these additional grounds for vacating the award at all in his brief.   The court deems them to have been abandoned.

FN2. Their procedure for filing a “formal” appearance with the ADRC appears to be less formal than the analogous rules in practice before the court.   Rule 15 of the ADRC's commercial rules provides:  “The parties hereto may be represented by legal counsel or an authorized representative.   Such person shall be identified to the Case Manager and the opposing party not later than seven calendar days prior to the commencement of the initial hearing.”.  FN2. Their procedure for filing a “formal” appearance with the ADRC appears to be less formal than the analogous rules in practice before the court.   Rule 15 of the ADRC's commercial rules provides:  “The parties hereto may be represented by legal counsel or an authorized representative.   Such person shall be identified to the Case Manager and the opposing party not later than seven calendar days prior to the commencement of the initial hearing.”

FN3. The plaintiff attests in his affidavit that, through administrative error, he did not open the package received July 7, 2010 until after the arbitration occurred.   He makes no representation that he did not receive the March 22, 2010, notice..  FN3. The plaintiff attests in his affidavit that, through administrative error, he did not open the package received July 7, 2010 until after the arbitration occurred.   He makes no representation that he did not receive the March 22, 2010, notice.

FN4. Rule 18 of the ADRC's commercial rules provides, in relevant part:  “[I]f either party or representative fails to appear or request postponement after due notice of the hearing, the hearing will proceed ex parte and the arbitrator(s) shall have the authority to render the award.”.  FN4. Rule 18 of the ADRC's commercial rules provides, in relevant part:  “[I]f either party or representative fails to appear or request postponement after due notice of the hearing, the hearing will proceed ex parte and the arbitrator(s) shall have the authority to render the award.”

FN5. General Statutes § 52–418(a) provides, in relevant part:  “Upon the application of any party to an arbitration, the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when the court is not in session, any judge thereof shall make an order vacating the award if it finds any of the following defects:  (1) If the award has been procured by corruption, fraud or undue means ․.  FN5. General Statutes § 52–418(a) provides, in relevant part:  “Upon the application of any party to an arbitration, the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when the court is not in session, any judge thereof shall make an order vacating the award if it finds any of the following defects:  (1) If the award has been procured by corruption, fraud or undue means ․

FN6. Counsel was no longer in the defendant's employ and was deposed as a witness and not as a party to this proceeding..  FN6. Counsel was no longer in the defendant's employ and was deposed as a witness and not as a party to this proceeding.

FN7. In contrast, the issues with respect to store # 11581 appear to have revolved around an intention to relocate stores..  FN7. In contrast, the issues with respect to store # 11581 appear to have revolved around an intention to relocate stores.

FN8. Rule 3.3 of the rules of Professional Conduct is titled “Candor toward the Tribunal” and requires, in relevant part:  “(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.”.  FN8. Rule 3.3 of the rules of Professional Conduct is titled “Candor toward the Tribunal” and requires, in relevant part:  “(d) In an ex parte proceeding, a lawyer shall inform the tribunal of all material facts known to the lawyer that will enable the tribunal to make an informed decision, whether or not the facts are adverse.”

FN9. The plaintiff also faults Attorney Allen for not calling either the plaintiff or his counsel when neither appeared for the hearing, but has not pointed to a rule requiring him to do so.   Discourtesy, as the plaintiff characterizes it, is not similar to fraud or corruption..  FN9. The plaintiff also faults Attorney Allen for not calling either the plaintiff or his counsel when neither appeared for the hearing, but has not pointed to a rule requiring him to do so.   Discourtesy, as the plaintiff characterizes it, is not similar to fraud or corruption.

FN10. Indeed, the plaintiff's counsel, in his brief, declined to “cast any judgment on whether Attorney Allen intentionally violated Rule 3.3(d) ․” (Emphasis in original.).  FN10. Indeed, the plaintiff's counsel, in his brief, declined to “cast any judgment on whether Attorney Allen intentionally violated Rule 3.3(d) ․” (Emphasis in original.)

Keegan, Maureen M., J.