Summary
The United States Court of Appeals for the Third Circuit affirmed the confirmation of an arbitration award against Bapu Corporation and Harshad S. Patel in favor of Choice Hotels International. The court rejected challenges based on the contractual limitations period, alleged arbitrator bias, and improper service of the arbitration demand. It held that the appellants failed to establish any ground for vacatur under the Federal Arbitration Act.
Topics
Practice areas
Questions Presented
- Whether the arbitrator's handling of appellants' contractual and Maryland-law limitations defense constituted manifest disregard of the law or otherwise exceeded the arbitrator's powers under the Federal Arbitration Act.
- Whether the alleged relationship between the arbitrator's former law firm and Choice demonstrated evident partiality requiring vacatur.
- Whether Choice's service of the arbitration demand on an incorrect entity constituted fraud or otherwise required vacatur of the arbitration award.
Holdings
- The District Court properly refused to vacate the arbitration award based on the arbitrator's handling of the three-year limitations issue because appellants waived the issue by failing to renew their objection after being permitted to do so, and the record did not show that the arbitrator disregarded the law or exceeded his powers.
- The alleged remote connection between the arbitrator's former law firm and Choice did not establish evident partiality sufficient to vacate the arbitration award.
- Choice's inadvertent service of the arbitration demand on an incorrect entity did not require vacatur because appellants failed to establish fraud, and the service error did not prejudice them or affect the issues decided in arbitration.
Key quotations
“Under the Federal Arbitration Act (“FAA”), there is a strong presumption in favor of enforcing arbitration awards.” (at 308)
“There is nothing in the record to indicate that the arbitrator disregarded the law.” (at 309)
“We agree with the District Court that appellants failed to demonstrate an “evident partiality” on part of the arbitrator necessary to vacate an award under 9 U.S.C. § 10(a)(2).” (at 310)
Factual background
In 2000, Bapu and Patel entered into a Quality Inn franchise agreement requiring renovation of a leased building by November 30, 2000. They failed to complete the renovations, and Choice later sent default and termination notices. Choice demanded arbitration in 2006, and after appellants objected but declined to participate fully, the arbitrator awarded Choice damages and costs.
Procedural history
Choice commenced arbitration seeking damages for appellants' alleged breach of a franchise agreement. After the arbitrator awarded Choice $142,560 in damages and $7,975 in costs, the District Court initially vacated the award based on the contractual limitations period, but on reconsideration held that arbitrability was for the arbitrator to decide and confirmed the award. The District Court entered judgment on November 20, 2008, and appellants timely appealed.