Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Plaintiffs, a group of retail sales employees of defendant, appealed from an order of the district court vacating an arbitration award on the ground that the arbitrator had exceeded her authority in light of the Supreme Court's decision in Stolt-Nielson S.A. v. AnimalFeeds International Corp. At issue was whether a district court had the authority to vacate an arbitration award where it believed that the arbitrator improperly interpreted the terms of an arbitration agreement. The court held that, because the district court did not undertake the appropriate inquiry - whether, based on the parties' submission for the arbitration agreement, the arbitrator had the authority to reach an issue, not whether the arbitrator decided the issue correctly - and instead substituted its own legal analysis for that of the arbitrator's, the court reversed the judgment of the district court. The court also held that, because the court found that the arbitrator acted within her authority to reach an issue properly submitted to her by the parties and reached her decision by analyzing the terms of the agreement in light of applicable law, the award should not have been vacated. Accordingly, the court remanded with instructions to confirm the award.

Petitioner filed an arbitration claim against respondent with the Financial Industry Regulatory Authority ("FINRA") raising federal claims of securities fraud under section 10(b)(5) of the Securities and Exchange Act of 1934 ("SEC"), 15 U.S.C. 78a et seq., and SEC Rule 10b-5, as well as state-law claims. When respondent lost the FINRA arbitration, respondent appealed the arbitration order asserting various improprieties and asked the district court, and now this court, to undo the award. The court upheld confirmation of the award in full after giving careful attention to respondent's arguments and found them to be without merit. The court did hold, however, that the district court's judgment should credit respondent for approximately $75 million that petitioner received in exchange for selling some of the failed auction rate securities at issue and should have reduced respondent's liability for interest accordingly. Therefore, the court vacated the district court's judgment on that point and remanded for modification in light of the partial satisfaction of the award. The court rejected, however, respondent's attempt to alter the award's scheme for distributing interest earned on the securities portfolio.

In June 2009, defendant filed an arbitration demand against plaintiff alleging claims for wrongful termination and breach of contract based on plaintiff's failure to pay a performance bonus. Defendant subsequently filed a new demand for arbitration in October 2010, which included his original claims plus claims of fraud and breach of contract, after the arbitrator denied his motion to amend the original arbitration demand when he discovered evidence suggesting that plaintiff had padded estimated revenues for defendant's companies by $17 million. Plaintiff argued on appeal that the district court erred by not granting its motion for a preliminary injunction and temporary restraining order; that defendant's withdrawal from the first arbitration waived his right to a second arbitration; and that the first arbitration's October Order, denying defendant leave to amend, was an enforceable arbitration award. The court held that the Federal Arbitration Act, 9 U.S.C. 16(b)(4), precluded the court's review of the district court's order refusing to enjoin the arbitration. The court also held that a final decision with respect to an arbitration required an official dismissal of all claims and thus, where the district court stayed proceedings in lieu of dismissal, the decision was not final. The court further concluded that an arbitration award was a final adjudication of a claim on the merits and a procedural ruling that denied leave to amend was not an award since the decision had no effect on the merits of the proposed claims. Accordingly, the court dismissed the appeal for lack of jurisdiction.

Appellants appealed from an order of the district court denying its motion, made after a preliminary injunction was vacated by the court, to recover damages against an injunction bond posted by appellee. At issue was whether the district court correctly concluded that the damages sought were not proximately caused by the injunction, and that, in deciding this issue, the district court should have applied a presumption in favor of recovery against the bond. The court held that a wrongfully enjoined party was entitled to a presumption in favor of recovery against an injunction bond and that the district court's decision was insufficient to permit meaningful appellate review. Accordingly, the court vacated the order and remanded for reconsideration and clarification.

Plaintiff, a labor organization that represented a bargaining unit of defendant's employees, filed a formal grievance with defendant, challenging defendant's discontinuation of dues "checkoff," or deduction of dues from employees' paychecks, and seeking collection and remittance of all back dues with interest. At issue was whether the district court erred in concluding that the parties' dispute over checkoff of union dues was subject to arbitration pursuant to their expired collective-bargaining agreement. The court held that plaintiff's contractual right to checkoff of union dues survived expiration of the agreement and therefore, subjected the parties' disputes to arbitration.