Theresa Bumbolow v. Theresa Forman et al. (2013)

MEMORANDUM OF DECISION

This is a decision on a motion to confirm an arbitration award, brought by the plaintiff Theresa Bumbolow, (hereinafter, Bumbolow), dated October 2, 2012.   The defendants, Equinox Home Care, LLC (hereinafter, Equinox), and Theresa Foreman (hereinafter, Foreman), thereafter brought an application to vacate the same arbitration award, dated October 10, 2012.

After reviewing the file, hearing arguments on May 13, 2013, considering the memoranda of law filed by counsel, and the several exhibits, including the operating agreement, award, and e-mail exchanges between counsel and the arbitrator, the court declines to vacate the arbitration award.

This matter is the result of a dispute concerning the operation of the defendant limited liability company, Equinox.   On October 30, 2002, Bumbolow and Forman entered into a written operating agreement concerning Equinox, and said agreement contained an arbitration provision to resolve disputes that may arise between the parties.   The agreement to arbitrate is found in § 11.4 of the operating agreement, which requires that “[a]ny controversy or claim arising out of or relating to this [a]greement shall only be settled by arbitration in accordance with the rules of the American Arbitration Association, one arbitrator, and shall be enforceable in any court having competent jurisdiction.”   On September 8, 2011, a dispute arose, and the plaintiff filed a written demand for arbitration with the American Arbitration Association, (hereinafter AAA).

On October 4, 2011, the AAA appointed Attorney Ronald Case Sharp as arbitrator, and hearings were held before him.   The arbitration submission was unrestricted.   The gist of the dispute was that Bumbolow claimed that Forman had violated the terms of their agreement and had taken a greater share of profits from Equinox over a period of time.   The last day of evidence was June 7, 2012;  whereupon, briefs were ordered to be filed by July 20, 2012.   However, the arbitrator's award indicated that he did not close the hearing until the last day of August 2012.

On September 28, 2012, the arbitrator issued his final decision and award.   The arbitrator ruled in favor of Bumbolow and ordered that both Forman and Equinox purchase Bumbolow's interest in the company, which the arbitrator valued at two million dollars.   The operating agreement gave the arbitrator the authority to order the purchase if he found it fair and reasonable under the circumstances.

During the evidence, an issue arose before the arbitrator regarding an ongoing audit by the department of social services of the state of Connecticut, (hereinafter DSS), regarding an overpayment of two million, two hundred thirty-one thousand seven hundred eight dollars to Equinox.   That was a significant fact for the arbitrator, as the company potentially faced a significant charge back and liability, and that situation would have a substantial effect on the ultimate value of the LLC, and any potential decision by the arbitrator, which included ordering a purchase and sale by the parties.

Based upon what the arbitrator found to be a significant issue regarding the effect of the DSS audit on the membership interest, the arbitrator opined in § 2G of his award, that he held the hearing open until the last day of August 2012, or sooner if he was to be informed of the DSS audit.   Prior to the decision, and specifically on July 18, 2012, AAA sent an e-mail to counsel informing them that he was still seeking evidence/testimony regarding the results of the audit.   Further, on July 23, 2012, another e-mail sent to counsel from AAA confirmed that the arbitrator was seeking information regarding the audit.   Later, on July 26, 2012, the arbitrator reiterated in an e-mail to counsel that he was seeking information regarding the audit, to clear up statements made by Forman and later her lawyer, which were “diametrically opposed” to each other, and was not seeking testimony.

At no time was any objection raised by either party to the arbitrator's seeking the results of the audit, until Attorney Blake sent an e-mail to AAA and counsel on August 23, 2012.   Since that date, counsel has claimed that the thirty-day requirement to render an arbitration decision had passed, and the award has no legal effect pursuant to statute.

I.

“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.’   “ (Citations omitted;  Internal quotation marks omitted.)  Indstrl.  Risk v. Hartford, 273 Conn. 86, 92–23 (2005).

“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.”   (Citation omitted.)  Id., 294.

II.

The defendants, Forman and Equinox's sole objection to the motion to confirm the arbitration is the claim that the award was rendered by the arbitrator after the thirty-day time limit required by state statute and the AAA rules.   The defendants cite C.G.S. § 52–416a for the proposition that the arbitrator has thirty days in which to render a decision.   Section 52–416(a) provides:

If the time within which an award is rendered has not been fixed in the arbitration agreement, the arbitrator or arbitrators or umpire shall render the award within thirty days from the date the hearing or hearings are completed, or, if the parties are to submit additional material after the hearing or hearings, thirty days from the date fixed by the arbitrator or arbitrators or umpire for the receipt of the material.   An award made after that time shall have no legal effect unless the parties expressly extend the time in which the award may be made by an extension or ratification in writing.

However, our Appellate Court in Carr v. Trotta, 7 Conn.App. 272, 277 (1986), held that an arbitrator has the authority to declare that the hearing would be completed only upon his receipt of the transcript.  “Similarly, it was reasonable for the arbitrator in this case to postpone the closing of the hearing in anticipation of additional documents,” Shore v. Haverson & Design, 92 Conn.App. 469 (fn4.) (2005).  Given that precedent, and under these circumstances where the arbitrator was awaiting an audit result that concerned a multimillion dollar claim against the parties, it was reasonable and certainly necessary for the arbitrator to receive the audit results in order for him to have full information in order to render a decision.

The AAA rules in effect for this arbitration provide “[t]he award shall be made promptly by the arbitrator and, unless otherwise agreed by the parties or specified by law, no later than 30 days from the date of closing the hearing, or, if oral hearings have been waived, from the date of the AAA's transmittal of the final statements and proofs to the arbitrator,” R–41. In addition, “[i]f the parties agree or the arbitrator directs that documents or other evidence be submitted to the arbitrator after the hearing, the documents or other evidence shall be filed with the AAA for transmission to the arbitrator ․” R–32(b).

Section R–35 of AAA provides:  “[t]he arbitrator shall specifically inquire of all parties whether they have any further proofs to offer or witnesses to be heard.   Upon receiving negative replies or if satisfied that the record is complete, the arbitrator shall declare the hearing closed.   If briefs are to be filed, the hearing shall be declared closed as of the final date set by the arbitrator for the receipt of briefs.   If documents are to be filed as provided in Section R–32 and the date set for their receipt is later than that set for the receipt of briefs, the later date shall be the closing date of the hearing.   The time limit within which the arbitrator is required to make the award shall commence, in the absence of other agreements by the parties, upon the closing of the hearing.”

The arbitration agreement did not fix a time for the arbitrator to render an award.   However, while the evidence was completed on June 7, 2012, and briefs were ordered by July 20, 2012, it is clear from the award and a review of the e-mails which were exchanged in late July between all concerned parties, that the arbitrator was holding the hearing open until the end of August in order to receive a decision on the DSS audit.   There is no indication from the memoranda or exhibits on file that the arbitrator was satisfied that the record was complete at the close of the evidence in June or in late July 2012, when the briefs were due.   Nor is there any indication that the arbitrator declared the hearing closed prior to the end of August.   No objection was raised by any party to any delay until defendants' counsel sent an e-mail on August 22, 2012, suggesting that the matter be dismissed for failing to render a decision thirty days after the briefs were filed.   It is clear from the AAA rules in effect for this arbitration that the arbitrator was within his authority to hold the matter open until he was satisfied that he had a complete record which included the results of the DSS audit.

III.

In conclusion, the arbitrator held the hearing open for the limited purpose of receiving the results of a DSS audit, a factor which was crucial to the arbitrator's decision and award.   While C.G.S. § 52–416a provides a thirty-day time frame in which to render a decision, the circumstances of this case are such that the arbitrator was within his authority to hold the matter open to receive the results of the audit.   Further, the AAA rules in effect give the arbitrator authority to hold the matter open until he was satisfied that he had all the necessary information to make an informed decision.   Therefore, the motion to confirm the arbitration award is granted, and the motion to vacate the award is denied.

Matasavage, J.

Matasavage, Paul, J.