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Melissa Langlais, et al. v. Pennmont Benefit Services

July 10, 2012


The opinion of the court was delivered by: McLaughlin, J.


This case arises from a $3.8 million arbitration award that petitioners Melissa Langlais, Rebecca Edmundson, Rob Peritz, Rachel Martone, Jaime Farrel, Katrina Kniest, and George McLain (the "Petitioners" or the "McLain Family") procured against respondents John J. Koresko, V ("Koresko"), the Koresko Law Firm, P.C., PennMont Benefit Services, Inc. ("PennMont"), and Regional Employers Assurance Leagues Voluntary Employee Beneficiary Association Trust ("REAL VEBA Trust") (collectively "Respondents" or the "Koresko Parties"). Petitioners have moved to confirm the arbitration award issued in their favor and against the Koresko Parties. The Court will grant the motion as to PennMont, as to the corpus of the REAL VEBA Trust, but deny it as to the other respondents.

I. Factual & Procedural History

The arbitration in this case arose out of the denial of the McLain Family's claim for $3.8 million in death benefits under an employee benefit arrangement that the Koresko Parties are involved in administering. See Mot. to Confirm Arbitration Award, Ex. 2. Following the denial of their benefits claim, the McLain Family made an arbitration demand through counsel with the American Arbitration Association ("AAA") on November 11, 2010. Koresko informed the AAA by letter dated December 1, 2010 of his position that the McLain Family's "demand for arbitration [was] premature. The documents governing this matter provide that a decision of the Board of Trustees, after administrative process is first required." ECF No. 13, Ex. D.

When the AAA did not terminate the arbitration, Koresko emailed Claire Connelly, an assistant supervisor at the AAA. He again informed the AAA of his position that he "reject[s] AAA at this point," and that "there will be no arbitration." When Ms. Connelly replied that AAA would cease administration if Koresko presented the AAA with a court order that stays the matter, Koresko responded:

It is not my responsibility to do any such thing. What you are doing is meddling in the affairs of another person. How dare you purport to give us any instructions.

If you do not stop, we will sue you, personally, and AAA for tortuous interference with contract. We will then force you to get a court order. While you are doing this, you are violating the "bad boy" clause of the trust instrument . . . There was no decision of any Board of Trustees. Therefore, [the McLain Family's counsel] never had any right to contact you. Kindly get your nose out of our affairs . . . . There will be no further warnings.

ECF No. 13, Ex. E. According to the findings of fact in the arbitration award, Koresko subsequently made an ex parte phone call to the AAA-appointed arbitrator and said that he would name the arbitrator in a lawsuit for allegedly interfering with a business if he did not withdraw as arbitrator. See Mot. to Confirm Arb. Award, Ex. 3 ("Arbitration Award"), at 2. Koresko then advised AAA again that the Koresko Parties would not participate in the arbitration, maintaining that no decision of a Board of Trustees had triggered an arbitration. The Koresko Parties did not participate in the arbitration hearing, which was held on June 21, 2011. Id.

Rather than present his objections to the arbitrator or move to enjoin the McLain Family from proceeding with the arbitration, Koresko sued the AAA, the arbitrator, and Ms. Connelly (an AAA employee) on behalf of the Koresko Parties. Those cases were ultimately removed to this Court. See Case Nos. 11-cv-5276, 11-cv-5276, 11-cv-5277, 11-cv-5431 (collectively the "AAA cases"). The Koresko Parties requested that this Court enjoin the AAA from proceeding with arbitration, claiming that no Board of Trustees decision had triggered arbitration and that the arbitration violated plan documents. The Court dismissed the AAA cases on the basis of arbitral immunity. The Koresko Parties appealed, and the Court of Appeals for the Third Circuit granted a motion by the appellees to dismiss the appeals as moot. See ECF No. 27 in 11-cv-5276; ECF No. 20 in 11-cv-5277.

In the meantime, after the AAA cases were dismissed, the arbitrator entered an arbitration award for $3.8 million and attorneys' fees in favor of the Petitioners and against the Koresko Parties on September 20, 2011.*fn1 The McLain Family moved to confirm the award on September 26, 2011. ECF No. 10. This Court rejected the Koresko Parties' request for additional discovery as inappropriate and permitted the Koresko Parties to oppose the motion to confirm. ECF Nos. 19, 21. Shortly thereafter, the Court requested and the parties submitted supplemental briefing on the issue of whether non-signatories to an arbitration agreement could be bound to the award. ECF Nos. 24, 29, 30. The Koresko Parties have not moved to vacate the arbitration award, but have asserted in opposition that vacatur is appropriate.

II. Legal Framework

A. Judicial Review of Arbitration Awards Judicial review of arbitration awards is very limited.

See, e.g., Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003); Nationwide Mut. Ins. Co. v. Home Ins. Co., 278 F.3d 621, 625 (6th Cir. 2002) ("When courts are called on to review an arbitrator's decision, the review is very narrow; one of the narrowest standards of judicial review in all of American jurisprudence.") (citation omitted). There is a strong presumption in favor of enforcing awards. Brentwood Med. Assocs. v. United Mine Workers, 396 F.3d 237, 241 (3d Cir. 2005). Courts are not authorized to review arbitration decisions on the merits even if the decision rests on factual errors or misinterpretations of the parties' agreement. See Major League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001).

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., provides for judicial review to confirm, vacate, or modify arbitration awards. Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 578 (2008). Under the terms of § 9 of the FAA, a court must confirm an arbitration award unless it is vacated, modified, or corrected as prescribed in §§ 10 and 11. Section 10 lists statutory grounds for vacating an award, and § 11 lists those for modifying or correcting one. Id. at 582.

Under § 10 of the FAA, a court may vacate an award in four limited circumstances:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C. § 10.

There may also be a fifth, ...

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